China’s Xiaomi confirms $1b debt deal

Through its wholly-owned subsidiary Xiaomi Hong Kong, the Chinese company received the three-year syndicated loan from 18 banks across Europe, the Middle East, India, China, Hong Kong and Taiwan, Xiaomi said. "The global syndicate of top-tier banks is a strong endorsement of Xiaomi by the international capital markets," said Xiaomi CFO Shouzi Zhou.

The company initially wanted to raise $750 million but the target was increased to $1 billion – the same amount that Xiaomi secured for its debut facility in 2014 – in response to strong support from Chinese banks, Debtwire reported. However, none of the international banks that participated in the 2014 syndicated loan joined the new deal. More than a half of the new loan was taken up by Chinese banks, including China Merchants Bank and Bank of China, the report said.

Xiaomi last raised equity funding in late 2014 at a valuation of $45 billion, making it the world’s most valuable start-up at the time. Its backers included Qiming Venture Partners, Morningside Ventures, IDG Capital, Qualcomm Ventures, Temasek Holdings, All-Stars Investment, Yunfeng Capital, and Hopu Investment.

However, the company's smart phone sales have slowed in recent years as competitors like Huawei, Oppo and Vivo have released competitive devices. Xiaomi has tried to diversify its businesses into other segments such as online gaming and smart electronic devices. While certain hardware products – smart phones, TVs and set-top routers – are designed internally, Xiaomi likes to back independent manufacturers and help them sell products through its platform, creating a so-called Xiaomi ecosystem.

The company has yet to prove such a business model can revive its fortunes. Secondary pricing on its unlisted shares has fallen dramatically, with industry sources saying that equity stakes are available at valuations of $20 billion or below.  

Xiaomi said its smart phone shipments reached 23.16 million units in the second quarter of this year, up 70% year-on-year, thanks to its strategic shift to an omnichannel retail model. Previously the company focused on software and online sales for hardware products, with less emphasis on offline operations.

Xiaomi currently has 149 brick-and-mortar stores, but it wants to reach 1,000 outlets within three years, Lei Jun (pictured), the company's founder, said on his Weibo microblog.

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• Topics
• Greater China
• Technology
• Expansion
• Financing
• China
• TMT
• Xiaomi
• Venture
• Structured finance