Smartphone Maker Attracts Interest as Bankers Hunt for Next Big Chinese Tech Deal
Bankers still feeling the buzz of Alibaba Group ’s blockbuster listing last month have been casting around for the next big tech deal out of China. If the appetite by creditors to lend to Xiaomi Inc. is anything to go by, this four-year-old smartphone maker could be it.
Xiaomi, which sells more smartphones in China than Samsung Electronics Co. and Apple Inc., has borrowed $1 billion from 29 banks for a three-year loan, its first move to tap overseas funds for cash. The company has moved beyond China to sell in India and Indonesia, and a person familiar with the loan said Xiaomi is borrowing the money to expand overseas.
The loan is set to be completed on Friday, people familiar with the matter said. The lead bankers on the loan are Deutsche Bank AG , J.P. Morgan Chase & Co. and Morgan Stanley . Among others are ICBC Asia, a subsidiary Chinese lender of Industrial & Commercial Bank of China Ltd. , Brazil’s Banco do Brasil , Bank of Tokyo-Mitsubishi UFJ, Credit Suisse Group SA and Goldman Sachs Group Inc.
In attracting so many banks to its loan, Xiaomi has beaten Alibaba, which borrowed $8 billion last year from 22 banks, many of which were eager to get in on the Chinese e-commerce giant’s IPO mandate, bankers said.
Alibaba’s $25 billion IPO in New York last month was the largest ever, and all six of its lead banks were among the lenders on its $8 billion loan. Those six were Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, J.P. Morgan and Citigroup Inc.
Banks often charge less on loans than on other investment-banking deals, but lending can help build rapport that can lead to advising those clients on IPOs or mergers.
“Investment banks see business opportunities with [Chinese technology firms] in the future, and participating in a syndicated loan could be a good step in starting a relationship,” said Julien Begasse de Dhaem, Asia-Pacific head of fixed-income capital markets at Morgan Stanley.
Bankers said Xiaomi isn’t planning to go public soon. The company declined to comment.
Xiaomi is borrowing at attractive terms. Banks are charging 2.325 percentage points over London interbank offered rate for the $1 billion it is borrowing in two tranches. Companies with similar ratings to Xiaomi often are charged 2.5 percentage points over Libor.
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The number of banks on the Xiaomi deal isn’t a record in Asia, but it is rare that an unlisted company attracts so many lenders for a debut syndicated loan, according to bankers.
Closely held Indonesian conglomerate CT Corp. borrowed $1.3 billion from more than 30 banks in March. But CT has been borrowing in the international markets for years.
“Lenders feel more comfortable now with the technology industry than they did a few years back,” said Amit Khattar, Asia head of loan capital markets at Deutsche Bank.
Still, banks have turned more cautious toward lending to Chinese borrowers, especially as the economy slows. But the right credit always attracts lenders, said Sonia Li, Asia-Pacific head of syndicated and leveraged finance at J.P. Morgan.
Set up just four years ago, Xiaomi has been expanding quickly. In July, the firm started selling its phone in India, where early sales have been so encouraging that Xiaomi is considering making phones there. India is the world’s second-largest cellphone market after China.
Speaking at the WSJD Live Global Technology Conference on Tuesday, Hugo Barra, Xiaomi’s global vice president, said the company is looking at expansion into Brazil and Mexico. Sometimes called “the Apple of China” for the excitement it generates from consumers, Xiaomi sold about 18 million phones in the past year and it is forecasting sales of 60 million units this year.
While this loan is Xiaomi’s first overseas, it isn’t its first fundraising. The firm has raised a couple of rounds of funding by bringing in outside investors, but has declined to name them. In August 2013, Xiaomi said it raised a fourth round of funding that valued the firm at $10 billion, more than double its June 2012 valuation of $4 billion.
by Prudence Ho www.wsj.com
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