Internet company Baidu Inc. has sold $1 million worth of bonds, the first major debt offering by a Chinese tech corporation since the country began its regulatory crackdown on private companies. The two-part sustainable deal included the sale of 5.5-year and 10-year notes which have been valued at 83 basis points and 113 basis points, respectively.
An investment-grade issuer, this is Baidu’s first dollar bond of the year, with $1.95 billion of bonds being sold during 2020. Last year’s sales also included much higher premiums.
Having received a $1 billion bond sale quota from the National Development and Reform Commission, China’s top economic planning agency, Baidu has the discretion to determine what proportion it would like to utilize. Currently, the company has its sights set on shifting from a traditional internet services provider to an artificial intelligence company, with services ranging from the internet to smart speakers and ride-hailing.
While Baidu has not yet been a target of China’s tech crackdowns, the corporation will have to remain vigilant, hence the rationale behind its bond sale decision. “There will be some level of risk premium from the China tech crackdowns that Baidu will have to pay,” explained Kaveh Namazie, senior credit analyst at Australia & New Zealand Banking Group. With much of Baidu’s target market located in the U.S., the internet company may experience stunted sales due to the headlines being made around tech companies in China’s private sector.
