COUNTRY REPORT CHINA› YANGTZE OPTICAL CLEARS HEARING
YANGTZE OPTICAL FIBRE AND CABLE has cleared a
China Securities Regulatory Commission
hearing for a proposed Shanghai IPO of
about Rmb2bn (US$315m).
The Hong Kong-listed manufacturer plans
to offer not more than 75.79m A-shares, or
about 10% of its enlarged capital.
CICC is the sponsor.
Proceeds will be used to expand
production capacity, for working capital
and to repay loans.
The deal still needs written CSRC
approval.
NANJING SECURITIES has started pre-
marketing a Shanghai IPO of up to 275m
shares, or about 10% of its enlarged capital.
The brokerage could raise around
Rmb911m, based on its 2017 earnings
per share of Rmb0.16 and the regulators’
unwritten valuation cap of 23 times
historical earnings.
It will set the price on May 9 and start
bookbuilding two days later.
Soochow Securities is the sponsor and joint
bookrunner with Hua Ying Securities.
Proceeds will be used for working capital.
› ZHONGSHENG BUYS BACK CB
Hong Kong-listed car dealership ZHONGSHENG
GROUP HOLDINGS raised HK$3.925bn
(US$500m) from a five-year put-three
convertible bond while at the same time
repurchased a significant portion of an
outstanding HK$2.35bn CB due in October.
Last Thursday, the zero-coupon new CB
was marketed at a yield-to-put/maturity
of 2.25%–2.75% and was priced at the top
of the range. The conversion premium,
however, was set at 27.5%, below the
indicative range of 35%–40%.
Sole bookrunner JP Morgan sealed a
HK$2.35bn CB in Zhongsheng with a tenor
of 360 days last October. The CB was with
an initial conversion price of HK$20.286 per
share.
Shares of Zhongsheng closed at HK$22.75
last Thursday. In other words, the old
CB was in the money and investors were
likely to convert the bonds in the next few
months.
To avoid the dilution, the company
decided to buy back the old CB and sell a
new one to fund the repurchase.
The old CB holders, who have shorted
the stock to hedge their position, will have
to unwind their hedging if they are selling
the CB back to the issuer. The short-covered
activity is expected to grant support to
Zhongsheng’s share price.
Different from a typical CB, the reference
price of Zhongsheng’s new CB is not the
company’s last closing price. Instead, it will
be the higher of the company’s last close
of HK$22.75 last Thursday or the volume
weighted average price per share last Friday.
As the company’s share price was
expected to rise on Friday due to the short-
covered activity, the VWAP was likely to
be used as the reference price. As such,
investors asked for a lower conversion
premium and hence the deal was priced
below the marketed range.
Zhongsheng shares rose 3% to HK$23.45
on Friday afternoon.
It is understood that a large of majority
of investors in the old CB participated in
the new deal. There is an upsize option of
HK$775m which can be exercised in 30 days.
Credit spread was assumed at 300bp,
borrow at 1.5%, implied volatility at 28%
and bond floor at 92.Proceeds will be used
to repurchase the existing CB and for
general corporate purposes.
JP Morgan was the sole global coordinator
and sole bookrunner for the new CB.› BOCOM PLANS JUMBO CB ISSUE
BANK OF COMMUNICATIONS has secured
board approval to raise up to Rmb60bn
(US$9.43bn) from an issue of six-year
convertible bonds, joining a queue of
Chinese banks looking to issue CBs.
Shanghai Pudong Development Bank
and China Minsheng Banking aim to raise
Rmb50bn each from CBs, while China Citic
Bank plans a Rmb40bn CB offering.
BoCom will use the proceeds for Core
Tier 1 capital. The deal still needs approval
from shareholders and regulators.
PACIFIC SECURITIES has withdrawn its
application from the China Securities
Regulatory Commission for a proposed
issue of six-year convertible bonds of up to
Rmb1.7bn because of changes in market
conditions.
BOC International (China) was the sponsor.
Proceeds were to be used to support
the development of margin financing
and securities lending businesses, as well
as equity and fixed-income investment
business.› PESTICIDE PRODUCER TO SELL EBControlling shareholder NANJING NO.1 PESTICIDE
GROUP has received a no-objection letter
from the Shenzhen Stock Exchange to list
and transfer its planned private placement
of exchangeable bonds of up to Rmb1.5bn
with the shares of NANJING RED SUN as
underlying.
The group holds 301m Red Sun shares,
representing 51.75% of the company’s total
issued capital.
Haitong Securities is the sole bookrunner.
The deal still needs approval from the
China Securities Regulatory Commission.
Nanjing Red Sun is a manufacturer of
pesticides and chemical fertilisers.PLEASE CONTACT US IF YOU
HAVE INFORMATION ABOUT
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OR WITHIN THE MARKET
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