Hon Hai raises US$1 billion from bond sale

Taiwan-based Hon Hai Precision Industry Co. (??), the world's largest contract electronics maker, has raised a total of US$1 billion from corporate bonds issued in two tranches, according to statement filed with the Taiwan Stock Exchange Thursday.

In the statement, Hon Hai said that through its fully owned subsidiary Foxconn (Far East) Ltd., it had sold US$600 million worth of five-year bonds with a 2.25 percent coupon and US$400 million worth of 10-year bonds with a 3.00 percent coupon.

The bonds were guaranteed by the parent company, which recently acquired a 66 percent stake in Sharp Corp. of Japan for US$3.5 billion, with Foxconn (Far East) taking an 18.41 percent share, Hon Hai said. Bank of China (Hong Kong), Citi, Goldman Sachs and HSBC were joint bookrunners on the deal, according to the statement.

Hon Hai said it plans to use the proceeds from the bond sale to fund capital expenditure, dent refinancing and for general corporate financing.

The bond sale was the biggest fund raising activity by Hon Hai since 2014, when it raised NT$94 billion (US$2.97 billion) in a rights issue and global depositary receipts, local media reported Friday.

It was also the first time that Hon Hai was raising U.S. dollar denominated funds since 2010, when the company issued US$1 billion in overseas corporate bonds, the reports said.

Before its latest fundraising effort, Hon Hai had been sitting on more than NT$200 billion in cash, and the bond sales are expected to boost the company's coffers to allow for more acquisitions and future expansion, according to the reports.

Market analyst said that the timing of Hon Hai's US$1 billion bonds sale took into consideration the company's urgent need to raise funds to avoid rising borrowing costs amid fears that the U.S. Federal Reserve will hike its key interest rates in December.

The interest rates on the Hon Hai bonds were relatively low, compared with an average of 3-4 percent in bond yields set in the global market, since the company has sound fundamentals and is creditworthy, analysts said.

Meanwhile, Japanese media reported Friday that South Korea's Samsung Electronics Co. had disposed of its holdings in Sharp since Hon Hai completed its acquisition deal in August.

Before Hon Hai's acquisition, Samsung had held a 3 percent stake in Sharp but its stake had been diluted by Hon Hai's presence to 0.7 percent, the reports said.

Source: Focus Taiwan News Channel