Despite China’s IT sector problems, Baidu raises $1 billion in ESG bond issuance.

Beijing-based Baidu Inc (9888.HK) has raised $1 billion in a two-tranche US-dollar sustainability bond, securing better-than-expected conditions in the face of robust demand and despite concerns about China’s governmental clampdown on the technology sector.

It was the first major debt fundraising by a Chinese technology company since the latest onslaught of regulatory actions began in July, and its success should provide other issuers with confidence that there is still significant global investor interest in Chinese deals, according to bankers who commented on the deal.

As reported in a business release, the company’s 5-year tranche bond raised $300 million, while the 10-year tranche raised $700 million.

Its dominance in China’s search industry fueled demand, resulting in a final price that was much lower than the one that was initially announced to investors on Wednesday. According to two people with direct knowledge of the situation, demand from investors reached more over $5 billion.

“The IT industry has been experiencing a lot of noise lately. “One of the individuals, who did not want to be recognized because they were discussing private information, indicated that the Chinese search engine Baidu was able to overcome this, and volatility in the stock market has been more obvious in stocks than in the credit market.”

Baidu, which intends to use the revenues to pay down debt and fund ESG-related projects, did not react to a request for comment immediately after being contacted.

Compared to original guidance of plus 115 basis points, the shorter-term bond was priced at U.S. Treasury notes plus 83 basis points, and the longer-term bond at U.S. Treasury notes plus 113 basis points compared to initial guidance of plus 150 basis points, respectively.

According to the company’s prospectus for the transaction, it was unclear whether new Chinese rules requiring companies planning to list overseas to be reviewed by the Cyberspace Administration of China would have the same consequences for companies that are already listed abroad and intend to conduct additional equity or debt offerings.

Chinese enterprises have raised $121.2 billion

According to Dealogic statistics, Chinese enterprises have raised $121.2 billion in U.S. dollar debt funding so far in 2021, a figure that is somewhat lower than the $126.6 billion raised during the same period the previous year.

Chines authorities have reversed their previously laissez-faire attitude toward the tech industry by initiating an unprecedented number of antitrust investigations, imposing fines, and establishing new rules. New rules were announced this week with the goal of combating anti-competitive behaviour and the handling of personal data by businesses.


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