In response to the intensifying price wars in China's food delivery and local retail markets, Meituan is planning to initiate the largest sovereign bond issuance in its history, aiming to raise approximately US$3 billion to reinforce its financial "ammunition" in this protracted battle.
On Monday, Meituan announced on the stock exchange its intention to issue senior notes denominated in both US dollars and renminbi. According to reports, the company aims to sell around US$2 billion in US dollar-denominated bonds, along with an equivalent of US$1 billion in offshore renminbi bonds. The issuance could hit the market as early as Tuesday, but specific details may be adjusted based on investor feedback.
The funds raised from this issuance will mainly be used for refinancing existing offshore debt and meeting general corporate operational needs. According to Bloomberg data, a bond with a principal amount of US$750 million is set to mature on Tuesday, and this financing will provide critical support for Meituan's balance sheet management.
This year, industry giants including Alibaba Group and JD.com have rolled out substantial discounts and incentives, intensifying market competition and putting pressure on Meituan’s stock performance.
The US$3 billion financing will also mark Meituan's largest conventional bond issue to date. According to media compilation, Meituan first ventured into the US dollar bond market in 2020 with a US$2 billion bond issuance. In 2021, the company issued US$2.98 billion in convertible bonds. Last year, Meituan returned to the US dollar bond market, raising a total of US$2.5 billion through two issuances. After repaying the US$750 million bond maturing this week, the next significant offshore conventional bond for Meituan will mature in 2028.
The rating agency Fitch has assigned a "BBB+" rating to Meituan's proposed US dollar bonds, consistent with the ratings of its existing senior unsecured bonds. However, Fitch has revised Meituan's rating outlook from "positive" to "stable." The agency noted that due to fierce market competition in the food delivery and flash purchase segments, Meituan's revenue growth is expected to slow in the short term, leading to a corresponding decrease in profitability and free cash flow generation capability.
Despite the short-term pressures, Fitch expresses optimism about Meituan’s long-term prospects. The agency anticipates that the intensity of the current price war will ease over the next 6 to 12 months. Fitch believes that with its extensive merchant network, reliable delivery capabilities, deep local market experience, and ample net cash, Meituan can maintain its strong market leadership position in core local business areas and expects the company to generate positive free cash flow by 2026.