Mar 25, 2020 (China Knowledge) - According to people familiar with the matter, Xiaomi plans to issue RMB 8 bln (USD 1.13 bln) panda bonds, a Renminbi-denominated bond issued in China by foreign registered entity or financial institution.
The initial tranche is RMB 1 bln private placement bonds is planned with a fixed coupon for three years. The proceeds will be used to repay interest on loans to Xiaomi's projects in China, supplement its working capital and dealing with coronavirus pandemic. Bank of China (BOC) will be the lead underwriter and bookrunner of this transaction, with Industrial and Commercial Bank of China (ICBC) as the co-underwriter.
There has been no official response from Xiaomi yet.
Recently, the company is facing new uncertainties as the situation of the pandemic spreads globally.
At a recent public conference call dealing with the pandemic, Wang Xiang, president of Xiaomi Group, said that, as of March 19, the overall recovery rate of their supply chain had exceeded 80%.
But when Mr. Wang was asked whether Xiaomi's overseas business would be affected, he didn't respond directly, saying, "they are very confident about the market and the future, and the difficulties are only temporary for now."
With the epidemic outbreak in Europe and India, Xiaomi's international revenue in 2020 will inevitably be affected, given that its market share of this part of the world had reached nearly half of total as of Q3 2019.
On Mar 23, China International Capital Corporation (CICC) lowered its global smartphone shipment forecast for the second time, to reflect the impact of global pandemic outbreak.
CICC expects global smartphone shipments to fall 7% year on year in 2020. The combined impact of China and overseas outbreaks in Q2 of this year will lead to the biggest year-on-year drop of 26%.
Having withstood the impact of the China domestic epidemic in the first quarter, Xiaomi continues to face the challenge from international mobile phone market in the second quarter. With the issuance of panda bonds, it should provide sufficient financial buffer for Xiaomi to deal the current market uncertainty.
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