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Bonds

Xinyu Hengdeli seeks 1b yuan from bonds

PUBLISHED : Thursday, 26 July, 2007, 12:00am
UPDATED : Thursday, 26 July, 2007, 12:00am

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Xinyu Hengdeli, a mainland luxury watch distributor partly owned by Swatch, is seeking to raise at least one billion yuan from selling convertible bonds to fund expansion, according to a term sheet sent by BNP Paribas to investors.


The five-year bond was being marketed with a yield of 2 per cent to 2.5 per cent annually. The issuer could offer an additional 150 million yuan worth of bonds if demand warrants. Investors can swap the bonds into shares when the stock price reaches HK$7.06, a 45.3 per cent premium to the HK$4.86 it was last traded before suspension yesterday.


The company has an option to redeem the bond three years after sale at 120 per cent of the conversion price, the term sheet shows.


'Bookbuilding was completed in a short time give the firm's track record and the nature of the issue as investors are betting on further appreciation in yuan,' said a source close to the offering. 'Most of the buyers already have shares in Hengdeli which they have held for a long time.'


Hengdeli shares have gained almost 60 per cent this year as investors expect the firm to benefit from higher demand for luxury watches amid rising disposable income.


'We believe potential earnings and share-price drivers including further acquisitions of peer companies rolling out the retail network faster on the mainland, faster network expansion and also the firm's strategic shareholders increasing their shareholding will provide increased confidence for the market,' according to a report by HSBC.


Hengdeli, which has 103 mainland stores, is stepping up expansion in inner cities and provinces including Wenzhou, where it bought a nine-store chain last year, and Anhui, where it acquired a five-store chain.


In Hong Kong, it has acquired Elegant International, which has four outlets in the city.


Time to expand


The number of stores owned by Xinyu Hengdeli across the mainland: 103