The Chinese manufacturer is looking to get about $1 billion from a small group of lenders. This isn't so much in response to its ban in the US, and many suppliers cutting them off, but more because it needs the money, as some other loans are coming due in the next year.
Huawei is looking for an offshore loan in either US or Hong Kong dollars, and it is targeting maturities of five and seven years. This would give Huawei enough time to reinvest the money in its business and hopefully make the money back to pay off the loan when the time comes.
These talks are reportedly at an early stage, so there's no guarantee that a deal would be made. But this is a good test to see what the market thinks of Huawei given the news in the past week surrounding the company. Another thing to look out with this loan, would be the pricing. Depending on where the pricing of this loan hits, it would show the market's perception of Huawei's financial strength. If the market thinks Huawei is still strong, it would be priced lower, and priced higher if they think Huawei is in trouble.
Currently, Huawei already has about 37 billion yuan (or about $5.3 billion USD) in unsecured bank loans, as of last December. About 2.8 billion yuan, are due in a year or less. That's according to Huawei's 2018 annual report. That sounds like a lot, but Huawei does have cash and cash equivalents of about 2.6 times the total borrowing, as of the last quarterly report. So it's not in a dire need of cash, like a company like Sprint is in.
Company's like Huawei do typically fundraise once a year or so, to bring in some more money. That cash is used to reinvest in the company, for things like Research and Development, or expanding operations. Given how large Huawei is, one might think it doesn't need the cash, but any company is always in need of more cash. As you never know when business might dry up.
Case in point, analysts believe that Huawei's shipments are going to drop about 25-percent this quarter. For a company that is in the top three smartphone makers worldwide (either two or three, depending on the report you look at), that's actually a pretty big number. And that also means that there is less revenue coming in for Huawei.
The US ban on Huawei is having an effect on all of its businesses. Huawei is the largest provider of networking gear, and that is the business that the US is really targeting. As it does not want US wireless carriers relying on Huawei's networking gear for their 5G networks. Especially since the US government is afraid that Huawei is used by the Chinese to spy on its users.
Given how this round of fundraising goes, will determine how the market is reacting to the news about Huawei this week. But even if the loan pricing is high, it shouldn't make Huawei bankrupt.