SHK Hongkong Industries is paying $52.5 million for a 7.06 per cent stake in household appliances maker Shell Electric Mfg (Holdings) Co. The investment company has struck the deal through an interest-bearing convertible note, which will pay out at 5.75 per cent per annum. The note, issued by Shell Electric, allows the bearer to convert into shares at an initial conversion price of $2.10 per share, subject to adjustment. This represents a 3.44 per cent discount to Friday's close of $2.175. Assuming full conversion of the note into shares at the initial conversion price, Shell Electric will issue 25 million new shares. A statement released yesterday said: ''The directors believe that the note will provide Shell Electric with a new source of term funding which will be used as working capital. ''In addition, SHK Industries is in discussion with Chinese parties with respect to the establishment of a chain of department stores in China. ''Upon completion of the negotiation, Shell Electric intends to participate in the project to expand distribution for its products through the chain.'' Three directors of SHK Industries are also directors of Shell Electric, but beyond that there are no associations between the two companies.