The Strategist

Xiaomi to apply for $ 1 bln loan

09/26/2019 - 07:24

Xiaomi, a Chinese manufacturer of smartphones and other consumer electronics, intends to apply for a loan of $ 1 billion. To do this, the company has already begun negotiations with potential lenders, Bloomberg news agency reported citing people familiar with the situation.

Jon Russell via flickr
Jon Russell via flickr
The last time when the Chinese electronics manufacturer took a loan was in 2017. According to the agency, now the company is trying to get additional cash against the backdrop of a worsening macroeconomic situation associated with the protracted trade war between China and the United States.

Xiaomi is discussing the possibility of lending at the lowest possible interest. The main problems of Xiaomi are related to the fact that Huawei is taking away the market share from the company, and consumers are postponing the purchase of new phones, waiting for the launch of the fifth generation (5G) networks and devices supporting them.

In early September 2019, Xiaomi announced the launch of a share repurchase program worth Hong Kong $ 12 billion (about $ 1.53 billion). The company is changing its cash management strategy to spur quotes growth.

Shares of the company that held an IPO in Hong Kong last year have lost nearly half their value since then. This can be explained by a sharp slowdown in company growth and increased competition. The papers also suffered losses in the Hong Kong stock market, which plummeted after the start of massive anti-government protests in June.

By the end of June 2019, Xiaomi had accumulated cash and cash equivalents of 34.9 billion yuan ($ 4.92 billion), and the total debt reached 13.8 billion yuan ($ 1.9 billion). In Q2, the company recorded a positive cash flow of 11 billion yen ($ 1.6 billion).