Baidu's $618 million bond offering in dim sum will strengthen artificial intelligence objectives, despite weak financial results
Baidu, the Chinese search engine giant, has announced the issuance of a 4.4 billion yuan (US$618 million) dim sum bond. The offering is expected to close on or about September 15, 2029, and carries an annual coupon of 1.9%.
The bond is part of Baidu's aggressive artificial intelligence expansion. According to recent data by Bloomberg, the total amount of dim sum bonds issued as of late August this year amounts to US$43.8 billion. Baidu is among a group of issuers taking advantage of relatively low Chinese interest rates.
This is not the first dim sum bond for Baidu. The company had already sold a dim sum bond raising 10 billion yuan in March. The current issuance is also part of increased demand from investors seeking alternatives to US dollar assets.
The first issuance in March consisted of two tranches: 7.5 billion yuan in 5-year bonds and 2.5 billion yuan in 10-year bonds. The bond matures in 2029.
Despite the dim sum bond issuance, Baidu's financial performance in the second quarter was not as strong. The company last month reported weak second quarter earnings, with its total revenue dropping 2 per cent to 26 billion yuan. Baidu's net profit for the second quarter fell 34 per cent to 4.8 billion yuan, compared with a year earlier.
However, the dim sum bond issuance by Baidu is not directly linked to its financial performance in the second quarter. The CEO of Baidu was advised by the group Credit Suisse during the issuance of the dim sum bonds.
Many expect Chinese offshore debt to reach further records by year-end. The dim sum bond issuance by Baidu is part of a larger trend of issuers taking advantage of relatively low Chinese interest rates.
The issuance of the dim sum bond is a strategic move by Baidu to fund its expansion in artificial intelligence, a sector that is expected to drive growth in the future. The specific funds raised from this issuance are not specified.
In conclusion, Baidu's issuance of a 4.4 billion yuan dim sum bond is a significant move in the Chinese financial market, particularly in the context of the current low interest rates and increased demand for alternative assets. The funds raised will contribute to Baidu's aggressive expansion in artificial intelligence, a sector that is expected to be a key driver of growth in the future.
