TENCENT Music Entertainment Group, the leading online music entertainment platform in China, attracted a huge demand when it debuted in the offshore debt capital market with the pricing on August 26 of a dual-tranche offering totalling US$800 million.

The SEC-registered deal consisted of a five-year bond amounting to US$300 million, which was priced at 99.928% with a coupon of 1.375% to offer a yield of 1.39%. This was equivalent to a spread of 110bp over the US treasuries, which was in line with the final price guidance and 45bp tighter than the initial price range of 155bp area.

The other tranche was a 10-year bond amounting to US$500 million, which was priced at 99.595% with a coupon of 2% to offer a yield of 2.045%. This represented a spread of 135bp over the US treasuries, which was also in line with the final price guidance and 45bp inside the initial price range of 180bp area.

The offering attracted a total order book in excess of US$10 billion, with the five-year bond garnering final demand of over US$4.4 billion from 313 accounts. In terms of geographic distribution, 39% of the paper was allocated in the US, 35% in Asia and 26% in EMEA. By type of investors, fund managers accounted for 66%, banks 16%, insurance companies, pension funds and sovereign wealth funds 14%, and private banks and other investors 4%.

The 10-year tranche garnered a total demand of over US$5.75 billion from 225 accounts and was also broadly distributed to Asia with 38%, the US 35% and EMEA 27%. Fund managers were also the biggest buyers with 70% of the bond, followed by insurance companies, pension funds and sovereign wealth funds with 20%, banks 8%, and private banks and other investors 2%.

Proceeds from the bond issuance will be used for general corporate purposes. Bank of America Securities, J.P. Morgan, Goldman Sachs and Morgan Stanley were the joint bookrunners for the transaction as well as joint lead managers, along with Bank of China (Hong Kong), Credit Suisse, Deutsche Bank, HSBC and Mizuho Securities.

Moody’s Investors Service, which assigned an A2 rating to the bond offering, cites the company’s underlying credit strength, reflecting its dominant market position with established operations, proven monetization ability and consistent free cash flow generation. “Its strong financial profile and net cash position provide financial flexibility and serve as a buffer for growing industry competition, potential regulatory risks and future investment needs,” says Moody’s vice-president and senior analyst Ying Wang.