A visitor checks out a Huawei device at the Huawei Campus in Dongguan, Guangdong Province on August 10, 2019. Photo: VCG

China's telecommunications giant Huawei will issue a medium-term note on Wednesday of 4 billion yuan ($618.3 million) with three-year maturity, its second issuance this year, bringing its domestic bond total to 23 billion yuan since the first issuance in 2019.

The underwriter is Industrial and Commercial Bank of China (ICBC), one of the country's big five State-owned banks. China Development Bank will be the co-lead underwriter, according to a prospectus on the official website of China Foreign Exchange Trade System. 

Huawei stated in the prospectus that it expects the company's various businesses to maintain steady growth, and capital expenditures will also increase. The money raised will be used to supplement the operating capital of the company's headquarters and its subsidiaries. 

On January 29 this year, Huawei issued the first tranche of medium-term notes of 4 billion yuan.

Looking back further, Huawei first issued 3 billion yuan worth of medium-term notes in the Chinese mainland in October 2019 to raise funds. A total of two medium-term notes were issued that year, with a total amount of 6 billion yuan. Four medium-term notes were issued in 2020, with a total amount of 9 billion yuan. 

With the two issues so far this year, it is estimated that Huawei's domestic financing through bonds will reach 23 billion yuan, according to media reports.

Huawei founder and chief executive officer Ren Zhengfei previously said that one of the reasons for the bond issuance program is that Huawei used to raise capital through Western banks, but now that financing channels in the West are not as accessible as before, Huawei has turned to domestic banks to raise money.

The frequent bond issuances also come as Huawei has been under mounting pressure from US sanctions in recent years. Huawei's consumer businesses, where its main revenue comes from, have been under rising pressure amid the US microchips ban.

Analysts said the losses in the consumer businesses will no doubt affect its revenue in 2021. 

Normally, companies will issue bonds one to two times a year, so it's a bit unusual for Huawei to issue bonds four times a year, Xi Junyang, an economics professor at the Shanghai University of Finance and Economics, told the Global Times on Tuesday. 

Another industry analyst, who asked to remain anonymous, said that Huawei is not in urgent need of cash at the moment, especially when it has just sold off its budget mobile phone brand Honor and secured considerable cash inflow.

"The funds may be used in the research and development of chips and other technology in 5G to maintain its leading position in the world," said the insider.

Huawei recorded revenue of $136.7 billion for 2020, up 11.2 percent year-on-year, while profit rose 10.4 percent to $9.9 billion, financial news portal yicai.com reported in early February, based on unaudited internal accounting reports.

Historically, Huawei will release its annual earnings report in March or April.

Global Times