Xingda International Holdings, which plans to raise up to US$150 million in a Hong Kong initial public offering next month, may see its bond investors convert their holdings into shares soon because of the company's strong profits and big dividend payments, according to its IPO sponsor Goldman Sachs.
Xingda's outstanding convertible bonds, worth about 427 million yuan, are now held by government-owned Singapore Investment Corp, Lee Shau-kee and Goldman. They can be swapped into Xingda's shares at 1.881 yuan each.
'In view of Xingda's strong earnings growth and good dividend payout capability, we believe these convertible bond owners will choose to convert them sooner than later,' Goldman said in a research report to clients.
Xingda, the mainland's largest and the world's fifth-largest radial tyre cords maker, last year issued the bonds, which carry an annual interest rate of 1 per cent with a maturity period of three years.
Singapore Investment transferred 42 million yuan worth of its 356 million yuan holdings to Goldman's strategic investment arm in September. Mr Lee's holdings have a face value of 71 million yuan.
Goldman replaced BNP Paribas Peregrine as the IPO's sponsor. Its strategic investment arm owns 3.39 per cent of Xingda. The mainland firm's biggest shareholder is chairman Liu Jinlan and his family, who together own 47 per cent.