(Oct 21): Lenovo Group Ltd is seeking a US$2 billion (RM8.16 billion) loan priced more cheaply than an earlier facility that it plans to refinance, according to people familiar with the matter, as banks in Asia remain eager to lend to major Chinese firms amid a dearth of deals.
 
The five-year facility, which it has launched into syndication, is priced at 75 basis points (bps) over the Secured Overnight Financing Rate (SOFR), said the people, who asked not to be identified discussing private matter. 

The pricing is considerably tighter than the 110bps plus a credit adjustment spread over SOFR that Lenovo got for an equal-sized loan in 2022. The adjustment was related to the shift to SOFR from the London Interbank Offered Rate, the people added.

Lenovo is marketing the new loan as its artificial intelligence (AI) infrastructure business continues to grow. The company’s revenue jumped 43% in the quarter ended June and it has boosted its fiscal year outlook. It also comes in the midst of a deal drought in the broader Asia loan market, especially from Chinese borrowers who are able to tap cheaper funding onshore.

There have been only 54 offshore Chinese loan deals completed so far this year, a 17-year low, down from a peak of 135 borrowings in the same period in 2019, according to Bloomberg-compiled data. The value of deals, however, has jumped to about US$56.1 billion from US$38.4 billion a year ago, due mainly to TikTok developer ByteDance’s US$29.6 billion loan last month, Bloomberg-compiled data showed. 

ByteDance’s three-year loan, which is one of the largest dollar-denominated borrowings in Asia this year, had an opening margin of 68 basis points over SOFR, compared with a previous offshore facility it secured with an 85 basis point margin. Smartphone maker Oppo, meanwhile, is raising a US$1.2 billion-equivalent three-year loan offering a margin of only 50bps over SOFR.

BNP Paribas, Citigroup Inc, DBS Bank Ltd, HSBC Holdings plc and JPMorgan Chase Bank, NA Hong Kong are the coordinators of the Lenovo loan.

Lenovo, BNP Paribas, Citigroup, DBS, HSBC and JPMorgan declined to comment. 

Lenovo’s shares have slumped about 25% this month as concerns rise over the rapid expansion of AI infrastructure projects, but they are still up around 125% over the past year, according to data compiled by Bloomberg.

Lenovo separately raised US$2 billion from a seven-year convertible bonds sale in June and plans to use the proceeds to refinance existing debt and fund share buybacks.

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