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Chinese telecommunications giant Huawei Technologies is back for its second offshore loan this year, gauging interest among lenders for a loan of up to US$1.5bn after being snubbed by foreign banks on its previous visit.
Huawei is looking to raise five and seven-year money through bullet maturities, the same structure as a US$1.5bn club loan completed in July. That facility failed to attract international banks as it came soon after damaging sanctions restricting Huawei’s ability to buy components and technology from US firms without government approval.
Some international lenders still remain hesitant to commit to any loan for the company, despite Huawei’s solid performance in the face of the sanctions and an economic slowdown in China stemming from the country’s ongoing trade war with the US.
“Huawei is a resilient credit, so we’re not giving a straight ‘No’ like last time, but with the US ban still in place, we remain very cautious,” said a Hong Kong-based banker at an international bank.
As in July this year, Chinese banks are expected to continue to show support with big-ticket commitments to Huawei on the latest loan.
“The borrower may not really need to tap international lenders as it should be able to obtain funding from its Chinese relationship banks”, said a Hong Kong-based banker at a Chinese bank.
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Recent developments bode well for Huawei’s latest loan. Earlier this month, the US government granted a second 90-day reprieve, allowing US firms to restart sales to the Chinese company.
US technology giant Microsoft said on November 20 that the US Department of Commerce had granted it a licence to export mass-market software to Huawei.
The company’s business performance is also encouraging with revenues jumping 24.4% year on year to Rmb610.8bn (US$86bn) in the first three quarters of 2019.
Its smartphone sales in China rose 66% year on year in the third quarter and captured a record 42% market share in the country, according to data from market research firm Canalys.
It remains to be seen whether international banks resume lending to Huawei, which is eyeing a tight timeline and pricing for its latest loan.
The company is looking to close the latest loan by the end of the year and is offering all-in pricing of about 130bp and 160bp respectively for the five and seven-year tranches – similar to the US$1.5bn loan that closed in July.
That loan took two months to close and was wrapped up in a highly secretive manner. It is unclear how many Chinese banks participated in the financing in light of the dramatic fall from grace of Huawei, which had gone from a darling to pariah within a few months.
In September 2018, seven of the 10 banks participating in its US$1.5bn five-year offshore club loan were international lenders. In December 2017, it raised another US$1.5bn syndicated loan which had 25 non-Chinese lenders out of a 27-strong syndicate.