Neo-China raises $1.3b from bonds

PUBLISHED : Tuesday, 16 May, 2006, 12:00am
UPDATED : Tuesday, 16 May, 2006, 12:00am


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Convertible bond deal is second-largest this year after Hengan's $1.5b offer

Mainland property developer Neo-China Group (Holdings) has raised $1.34 billion from the sale of convertible bonds, according to a term sheet.

The bonds can be converted into shares at $1.51 each, a 32 per cent premium on Friday's closing price of $1.14. Each bond represents 6,645.4 shares. Investors can sell the zero coupon, five-year bonds back to the firm after June 2009 at 120.1 per cent face value.

Bondholders will earn a 6.2 per cent yield by redeeming the bonds at maturity.

Neo-China's shares, which were suspended yesterday, have risen 48 per cent this year, compared with an 11 per cent gain in the Hang Seng Index.

JP Morgan arranged the sale, helping it rise to second place in year-to-date bank league tables for such sales, according to Dealogic. JP Morgan has now run $2 billion in convertible bond sales, compared with No1 Deutsche Bank's $2.3 billion.

Hengan International Group, which sells diapers and other personal hygiene products in the mainland, raised $1.5 billion last month in the largest convertible bond deal this year.

Hong Kong-listed companies have raised a combined $6.8 billion in 12 convertible bond sales this year, compared with 17 deals thus far last year raising $8.6 billion, according to Dealogic. Last year, companies raised a total of $13 billion from such sales.

Bankers said companies were opting for convertible bonds for funds while such costs were still low as interest rates were on the rise. The United States Federal Reserve has raised rates, now at 5 per cent, the last 16 times it has met.

Neo-China owns an 85 per cent stake in the American Rock Rock residential and commercial development in Beijing. The project has a floor area of 510,000 square metres and 5,400 residential and commercial units.

The company also owns 70 per cent of the 140,000-square-metre Youngman Point residential development, which has 1,587 apartments.

Both projects are located in Beijing's Chaoyang district, the largest and most populous area of the capital where the 2008 Olympic village is under construction.