Prosus has issued R80bn worth of new bonds, money that the technology group hopes to use for investment and acquisitions, as its credit ratings have improved with international agencies in line with the group’s growth.
The subsidiary of SA’s largest publicly traded company, Naspers, said on Thursday it had issued US dollar- and euro-denominated bonds as part of its continuing debt-financing programme, equivalent to $5.25bn (R80.67bn).
Corporate bonds are a form of debt in which investors lend money to the company issuing the bond or note. In return, the company makes a legal commitment to pay interest on the principal and, to return the principal amount when the bond comes due.
Prosus said the purpose of the new issue is to “provide financial flexibility to pursue our growth initiatives both organically and through acquisitions, a strategy that has led to significant net asset value accretion for the group”.
As the R2.8-trillion group continues to grow, its credit profile has improved. The group is looking to strategically use more debt to fuel its ongoing investment and acquisition drive, which saw more than $7bn poured into fast-growing internet companies in 2021 alone.
“The group has considered it strategically important and financially prudent to make efficient use of the increased debt capacity built into our credit ratings,” Prosus said on Thursday.
The issuance is made up of $1bn notes at 3.257% due in 2027; $1bn of notes at 4.193% due in 2032; $1.25bn in notes at 4.987% due in 2052; €500m notes at 1.207% due in 2026; €600m notes at 2.085% due in 2030; and €650m notes at 2.778% due in 2034.
The offerings are expected to close on January 19 with the debt listed through the Irish Stock Exchange. Prosus’s long-term credit rating was upgraded by S&P Global to BBB in December. It has a Baa3 rating from Moody’s Investors Service.
In addition to these funds, Prosus has a war chest of $16bn earmarked for buying up companies and reinvesting in operations in food delivery, classifieds, fintech and education.
Prosus recently announced its two largest deals to date: first, the acquisition of Stack Overflow, a knowledge-sharing platform for developers and technologists, for $1.8bn in June last year. Two months later, in August, the group acquired Indian digital payments provider BillDesk for $4.7bn, cementing its place as one of the world’s largest fintech players through its PayU unit.
This week’s bond issue is the latest in a series that has seen the group raise R75bn over the past two years, with R18bn in January 2020 and R57bn in July 2021.
This latest bond issue comes as uncertainty continues to loom over Prosus whose share price has been under pressure since July 2021 when China launched a wide-reaching crackdown on technology companies, including Tencent, the group’s largest asset. The crackdown led to the cancellation of the $37bn listing of Ant Group.
The value of Prosus dropped almost a fifth in 2021, wiping off more than R400bn as investors continued to worry about the safety of their capital in the Asian country amid the crackdown.
Things are a bit more positive this week, with Prosus shares up almost 9% over the past five days, owing to excitement over a potential deal in which Tencent will buy a gaming phone business from Chinese technology player Xiaomi. Tencent shares are up 7% over the past five days.
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