So with most of the world under lockdown, it seems the pandemic hasn’t yet put a damper on matters business, reports reaching us from the Hong Kong Stock Exchange (HKEX) say that the Xiaomi Corporation, is planning the issuance of US dollar bonds to corporate investors. The bond is normally reserved for corporate purposes and to fund repayment of existing loans.
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The size of the bond, its issuance date, and the proposed interest rate has not been determined yet. They will take into account existing market conditions first. Demand from potential investors will also play a key role. All this comes hot in the heels of the company’s financial reports. The reports show that Xiaomi’s annual revenue was in excess of ¥200 billion by the close of the year 2019. Its operating cash flow was ¥23.8 billion and its total cash reserve ¥66 billion.
That’s quite an impressive financial performance. It continues to bolster the company’s standing within the investment community.
Xiaomi has opted for the US dollar bond largely due to the reputation of the security. The US dollar bond has global recognition. This makes it highly tradable. According to Xiaomi, the bond issuance is suitable for creation of diversified, multi-layered financing channels for listed companies. It also enhances the company’s financial management flexibility and operational efficiency.
In light of the Fed’s current interest rate cuts. Companies can leverage the US dollar bond to lock in low-interest rates in advance. This is a very effective hedging strategy that will then cushion them from exchange rate risks to some degree. I will also strengthen the internationalization process that companies are already undertaking.
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