Dao Heng's convertible shares may raise the roof

THE convertible preference share issued by Dao Heng Holdings was oversubscribed two times, raising a total of $2.8 billion. The share issue forms part of the equity financing by Guoco to acquire the Overseas Trust Bank.

According to sources close to the deal, the three-year preference shares, which will be listed in Luxembourg, bear a five per cent coupon rate in the first year. The rate will increase to seven per cent in the remaining two years.

Conversion to Dao Heng stock is compulsory upon listing, but shareholders will enjoy a 10 per cent discount on the public offer price, giving the shares a maximum price-earning multiple of 13.5 times. If the acquisition fails, the discount will increase to 15 per cent.