Tencent to offer $600M in unsecured notes

Tencent is looking to offer US$600 million in unsecured senior notes on the Hong Kong Stock Exchange (HKSE) in September, but these notes will not be open to the general public. The raised funds will be mainly used to refinance short-term offshore loans, it reveals.

According to a statement issued by the company on Wednesday, it will be listing the unsecured notes on HKSE and trading will commence on Sep. 6, 2012. The notes will mature after 5.5 years on Mar. 5, 2018, and these are available only to "professional investors" as defined in the Securities and Futures Ordinance (Chapter 571) of the Laws of Hong Kong, it stated.

The estimated net proceeds of the offering, after the deduction of underwriting fees, discounts, and other estimated expenses, will amount to approximately US$594 million). Tencent plans to use the raised funds for "general corporate purposes".

When approached, a Tencent spokesperson said the funding exercise is to rebalance its mix of onshore and offshore cash, as well as "take advantage of the receptive markets to extend its debt maturity profile".

"The proposed bond proceeds is mainly to replenish offshore cash for offshore general corporate purposes, including refinancing short-term loans amounting approximately to US$370 million that are maturing in the second half of 2012," she said in the e-mail.

She added the company has a high total cash balance of 27.6 billion yuan (US$4.4 billion) as of Jun. 30 and has the ability to remit some of this to offshore accounts, but such remittance would incur up to 10 percent in withholding tax, the spokesperson explained.

The company churned the most revenue among the top 6 online game companies in China during the first quarter of 2012, generating 5.32 million yuan (US$843 million) in revenue to come out on top of NetEase, which raked in 1.8 million yuan (US$285 million).