Warren Buffett-backed carmaker BYD said yesterday that it would tap the markets for new funds for the third time in five months, announcing plans to issue up to six billion yuan (HK$7.32 billion) in mainland domestic bonds.
The Shenzhen-based company, which earlier this week reported a 99 per cent plunge in second-quarter profit, said the bonds would have a maximum tenure of 10 years and the deal would be subject to a shareholders' vote on September 9.
BYD raised 1.42 billion yuan in a Shenzhen A-share offering in June, and 1 billion yuan in April selling yuan-denominated 'dim sum' bonds in Hong Kong that pay a 4.5 per cent coupon and mature in 2014.
The manufacturer of cars, batteries and electronics said proceeds of the new bond sale would provide a 'source of medium and long-term funding and will be used to adjust the company's debt structure and to repay bank loans and supplement the company's working capital'.
Slumping sales have put pressure on BYD in recent months. The company said this week it had 4.78 billion yuan in cash on hand, but 11.16 billion yuan in loans and interest payments falling due within the next 12 months.
The new bond deal has yet to be priced, but BYD will likely face steeper interest rates. Net prices of mainland corporate bonds have fallen 8.2 per cent in the past year, according to an index compiled by China Central Depository and Clearing, as investors soured on corporate debt amid Beijing's repeated interest rate rises.