Sinochem Hong Kong Holdings, China's largest fertiliser importer, has raised $1.3 billion to fund its expansion by selling bonds that are convertible to shares.
The red chip, a subsidiary of oil and petrochemical distribution major Sinochem Corp, completed the sale of $1 billion worth of bonds yesterday, market sources said. The sole bookrunner, Deutsche Bank, then exercised an overallotment option to sell an additional $300 million worth of the five-year bonds.
The bonds carry a conversion price of $3.74 per unit, a 30 per cent premium to the company's share price of $2.875 before trading of its stock was suspended pending the announcement of the deal.
The bonds provide a lower-cost fund-raising channel for the company than bank loans, while investors can bet on the potential upside of its shares. If all the bonds are converted into shares, they will amount to 5.65 per cent of the firm's enlarged share capital.
Investors have an option to sell the bond back to the company at a 15.55 per cent premium to the selling price after three years or a 27.23 per cent premium after five years.
The proceeds will fund Sinochem Hong Kong's expansion of its fertiliser capacity, nationwide distribution network and other corporate needs, according to a term sheet given to fund managers.