THERE’S no let up in the rush by Chinese technology companies to issue convertible bonds, with online travel agency Trip.com now following industry giants such as Alibaba Group Holding into the action.
Trip.com announced on Tuesday (Jun 4) a proposed offering of US$1.3 billion convertible senior notes due in 2029 to help repay debt, expand overseas and for working capital needs. To ease any dilution effect, it plans to use cash to buy back up to US$400 million worth of American Depository Receipts when issuing the notes.
The activity follows hot on the heels of several announcements late last month, the biggest being Alibaba’s record-breaking US$5 billion issue. JD.com set the ball rolling in May with a US$2 billion convertible bond offering, and computer maker Lenovo Group also sold US$2 billion zero-coupon convertible bonds to a unit of Saudi Arabia’s sovereign wealth fund.
The companies are looking to get funds cheaply via low coupons as interest rates stay elevated. Meanwhile, the rush is a boost for bankers in Hong Kong, where general dealmaking in areas such as initial public offerings has slowed.
Trip.com is offering a coupon of 0.5 to 1 per cent on its notes and a 30 to 50 per cent conversion premium, according to terms seen by Bloomberg. It expects the offer to attract convertible arbitrage, a strategy where funds purchase notes and short the underlying stock, which could affect the share price. Trip.com slid as much as 4.1 per cent in Hong Kong on Wednesday morning, the most since Apr 29.
“Expect some near-term share price volatility amid convertible bonds hedging activity and possible profit-taking by short-term investors,” Citigroup analysts including Brian Gong wrote in a note. Trip.com’s issue makes sense despite its strong cash position, given it is expanding to gain share in Asia, has short-term borrowings of US$5.35 billion and needs investment, they said.
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Separately, Mergermarket reported on Tuesday that Meituan is working with Bank of America and Goldman Sachs on a second convertible offer, without disclosing details such as size and timing.
Meituan’s shares rose as much as 2.2 per cent, building on gains of 3.7 per cent and 4.1 per cent on Monday and Tuesday. The company’s first-quarter earnings are due on Thursday.
“As of today, Meituan has no plans to issue convertible bonds,” a representative for the online shopping platform told Bloomberg. BLOOMBERG
