Xiaomi, a Chinese mobile technology company, launched a $1bn loan into senior syndication last week, with the deal split equally between a bullet and revolver, both with three year tenors.
So far, so straightforward. But the absence of a Chinese bank in the mandated lead arranger and bookrunner group for a loan from what is essentially a Chinese success story, has raised eyebrows. Instead, the company has picked Deutsche Bank, JP Morgan and Morgan Stanley.
Bankers are putting the lack of China names down to the company’s limited appeal among lenders in the country that are more familiar with its business and who are assumed to be waiting to see how senior syndication pans out before jumping in.
A stronger credit, the argument goes, might have stayed onshore for its funding, especially as the majority of Xiaomi’s business comes from China. It would also have been cheaper to raise money at home.
The choice of JP Morgan and Morgan Stanley, in particular, has attracted some scepticism because these banks aren’t exactly the most active names in Asian syndications.
So far this year, JPM only makes it into the top 60 bookrunner ranking for deals in Asia ex-Japan, according to Dealogic. Morgan Stanley sits outside the top 100.
On the face of it, Xiaomi doesn't have a bad story. The company, which values itself at $10bn, has risen to prominence rapidly in the four years since it was set up. Shipments of its handsets have overtaken Taiwan’s HTC and are now enough to feature in the top ten globally.
And Xiaomi plans to enter as many as 10 new markets this year, diversifying its customer base away from China. With turnover in the Asia Pacific mobile market expected to more than double to $153bn by 2017, according to Frost & Sullivan, the future looks bright.
But not everyone is buying into the hype. The company has chosen to launch the deal into senior syndication first, rather than going straight to general, which would have been usual for a deal of this size.
It may have good reasons to do so, given the spectre of a cancelled debut from earlier this year. In April the company was seeking a $200m one year loan led by China Merchants Bank. But it was pulled after it failed to drum up enough interest, which bankers put down to the low margin of 180bp over Libor.
This time around it is offering a margin of 232.5bp. That certainly ought to help it get across the line, but not without a struggle.
Fans like to refer to Xiaomi as China's Apple. But for its fundraising to be a success, lenders are going to have to be confident that the deal can emulate the tagline of the borrower's US peer: "It just works".