(Yicai) March 11 -- Baidu's two new bond issuance plans targeting total borrowing of around USD3.4 billion will give the Chinese internet giant a chance to catch up with its competitors in artificial intelligence, according to an investment banker.

Despite Baidu's early investments in AI, the search engine giant has gradually fallen behind in recent years due to increasing market competition, the financial professional said. Whether Baidu's bond issuance can bring forth a turning point hinges on the company's ability to make use of these funds to accelerate technology research and development, as well as market expansion, to catch up with its competitors, the source added.

Beijing-based Baidu announced recently that it would issue up to USD2 billion of convertible bonds maturing in 2032 at a zero interest rate. Bondholders will have the option to convert every USD100,000 principal into 1,107 shares of online travel agency Trip.Com Group. The conversion price is USD90.33 per share, representing a premium of 43 percent over today's closing price. Baidu is the largest shareholder of Trip.Com, holding 9.4 percent of the travel agency's shares as of the end of last year.

Shares of Trip.Com dropped after Baidu revealed the plan that could effectively lower its stake in the operator of Skyscanner, MakeMyTrip, and Qunar.

Trip.Com [HKG: 9961] closed 0.4 percent lower to HKD491.40 (USD63.25) today after falling by 3.6 percent yesterday. Its Nasdaq-listed equity [NASDAQ: TCOM] slid by 2.5 percent to USD62.22 yesterday.

Baidu's second bond issuance plan involves priority unsecured notes totaling CNY10 billion (USD1.4 billion), according to another announcement. Three-quarters of that will carry an interest rate of 2.7 percent and mature in 2030 while the remainder will have an interest rate of 3 percent and expire in 2035. Priority debt refers to bonds that have a higher repayment priority than junior debt but since the bonds are unsecured, they are not backed by collateral.

The proceeds from both issuances will be used to repay existing debt, pay interest, and for general corporate purposes, Baidu said.

Last year, Baidu achieved a net profit of CNY23.8 billion (USD3.3 billion), up 17 percent compared to 2023. However, its total revenue declined by 1 percent to CNY133.1 billion (USD18.2 billion), according to the annual report.

Baidu [HKG: 9888] closed 0.3 percent higher at HKD92.25 (USD11.90) today.

Editors: Dou Shicong, Emmi Laine