Huawei Dollar Bonds Extend Slide as U.S Tech Firms Stop Supplies

(Bloomberg) --

Huawei Technologies Co.’s dollar bonds extended Friday’s record plunge as U.S. corporations began cutting ties with the company.

Top U.S. tech giants have frozen the supply of critical software and components to Huawei, sending the Chinese firm’s bond prices to the lowest level in more than two months. Huawei’s 4% note due 2027 dropped 0.3 cents to 93.2 cents on the dollar, after sinking 2.6 cents at the end of last week before a U.S. government ban on the company’s equipment came into effect.

“The market is very divided as the onshore money which presumably owns Huawei’s dollar bonds don’t believe it should go so low, as the state support is seen as certain, but international investors are clearly bidding lower,” said, Anthony Leung, Hong Kong-based head of credit research for Asia Pacific at Wells Fargo Securities LLC.

U.S. chipmakers including Intel Corp., Qualcomm Inc., Xilinx Inc. and Broadcom Inc. have told their employees they will not supply Huawei until further notice, after the Trump administration on Friday blacklisted the Chinese giant.

Shares in some of Huawei’s Asian suppliers tumbled. Sunny Optical Technology Group was the second worst performer on the Hang Seng Index after dropping as much as 6.3% on Monday.

“Huawei’s ability to service offshore bonds won’t be put to test,” Leung said. “The cash price drop doesn’t affect its coupon payment as the company is cash-rich so even the principal is not a problem at all.”

Huawei has four dollar-denominated bonds totaling $4.5 billion, with the first principal due in 2022, data compiled by Bloomberg show.

To contact the reporter on this story: Annie Lee in Hong Kong at olee42@bloomberg.net

To contact the editors responsible for this story: Neha D'silva at ndsilva1@bloomberg.net, Lianting Tu, Andrew Monahan

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