JD.com raises $1 bln on global bond market at lower cost
An advertisement for e-commerce retailer JD.com Inc in Shanghai.
China’s second-largest e-commerce platform JD.com Inc has made its global bond market debut, securing a relatively low borrowing cost when raising $1 billion in debt.
The company secured a Baa3 rating from Moody’s and BBB-from Standard & Poor’s, the lowest rating in the investment-grade category. The five-year $500 million tranche was sold at 3.125 percent and the 10-year $500 million tranche at 3.875 percent.
The investment-grade ratings to a loss-making company are due to expectation that its profitability, remaining weak at the moment, would improve in the upcoming months, due to its expanding product offering through direct sales and the marketplace, rating agencies said.
S&P noted that JD’s market share has climbed to 56.9 percent in terms of gross merchandise value, from 36.8 percent in 2011. The value of consumer electronics, which usually means low profitability, as a share of gross merchandise value has declined from 80 percent in 2011 to 51 percent in 2015.
However, a number of brokers argued that JD should be considered a high-yield credit because of its unprofitable status and the fact that it is more of a capital-intensive and hence inherently more volatile tech company.
The offering came following rising unease in the onshore bond market as a few default cases pushed yields high.