Tencent considers up to $5 billion offshore bond sale, Bloomberg reports

Tencent is considering raising up to US$5 billion through an offshore bond sale, Reuters reported on October 8, citing Bloomberg News, as the Chinese technology company increases spending on artificial intelligence and computing infrastructure. The proposal follows a major June debt offering and comes after a sharp rise in the company’s capital expenditure.

The securities could be issued in US dollars and offshore yuan, according to Bloomberg’s report, which cited people familiar with the matter. Reuters relayed a possible sale early in October, but that tentative timing does not establish that a transaction has launched or that any money has been raised.

Tencent had not immediately responded to Reuters’ request for comment when the report was published. The reported US$5 billion is a possible maximum, rather than a confirmed deal size. The Reuters account does not establish final interest rates, maturities, a settlement date or a binding allocation of proceeds.

Tencent’s AI spending and cash flow

Tencent’s second-quarter results provide a financial backdrop to the proposed borrowing. In its August 12 release of unaudited results for the quarter ended June 30, the company reported capital expenditure of RMB52.8 billion, up 176% from a year earlier. Those historical figures describe spending before the October report, rather than Tencent’s current cash position.

The company said AI-related prepayments supported enhancements to its Hy models, inference needs for its WorkBuddy office productivity service and CodeBuddy coding tool, and Weixin AI initiatives. It also linked the payments to developing AI capabilities across its products and services and meeting external demand for cloud services.

Tencent reported negative free cash flow of RMB13.8 billion for the quarter. Operating cash inflow of RMB52.7 billion was more than offset by capital expenditure payments of RMB59.3 billion, alongside media content and lease liability payments. The cash payments figure is separate from the RMB52.8 billion reported as capital expenditure.

Excluding prepayments for compute procurement, Tencent said free cash flow would have been positive RMB37.6 billion. That is the company’s adjusted comparison: its reported free cash flow remained negative. The distinction shows how the timing of infrastructure payments featured in its quarterly cash figures.

At the end of June, Tencent reported total cash of RMB511.2 billion and net cash of RMB58.2 billion, with net cash down 22% year on year. These balances provide context for the financing report, but do not establish that the company needs the proposed borrowing to meet its obligations.

How the proposal compares with June’s bond sale

Tencent already completed a substantial borrowing exercise this year. Reuters described its June offering as a US$4.66 billion transaction, the company’s largest debt deal since 2020, and said the proceeds were used for general corporate purposes, including AI development. That completed offering is distinct from the possible October sale.

Independent reporting by the South China Morning Post on June 10 detailed the earlier package: US$2.45 billion in dollar notes and 15 billion yuan, then approximately US$2.2 billion, in offshore yuan notes. The currency mix provides a precedent for the two currencies mentioned in the latest report.

The South China Morning Post said Tencent had announced its issuance plan two days earlier under a global medium-term note programme with a US$30 billion ceiling. That ceiling described the programme’s size; it was not the amount Tencent raised in June or a confirmed amount for the proposed October transaction.

Revenue growth alongside infrastructure investment

The spending increase came alongside growth in Tencent’s existing businesses. Second-quarter revenue rose 11% year on year to RMB204.8 billion, while profit attributable to shareholders under IFRS accounting standards rose 0.7% to RMB56.0 billion. Tencent also spent approximately HK$16.9 billion repurchasing 37.4 million shares during the quarter.

Marketing services revenue increased 22% to RMB43.6 billion. Tencent attributed support partly to improvements in its AI-driven advertising recommendation model and automated campaign management tools. Those disclosures describe AI’s role in an existing revenue-generating business, without establishing how much the proposed bond sale would contribute to future growth.

What remains unconfirmed about the October proposal

The October financing details remain attributed to Bloomberg’s unnamed sources through the Reuters report published by CNA. Tencent’s August results establish its earlier investment and financial position, while the June reporting establishes its previous borrowing. Neither confirms that the proposed October sale will proceed or what its final terms would be.