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BYD to raise up to 6b yuan with bond sale


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.

'Their net debt is quite high and it looks like financing costs will go up more,' Samsung Securities auto analyst Steve Man said. 'Higher interest rates are going to hurt earnings, but they already told people their results are going to be poor.'

BYD said this week it might see a net loss of up to 153.74 million yuan in the quarter that ends next month. Its car sales slid for the 12th consecutive month last month, falling 16.8 per cent from a year ago to 27,496 units.

Its ability to repay its 11.16 billion yuan in near-term loans would not be a problem, as it had available credit lines from banks of more than 70 billion yuan, BYD chairman Wang Chuanfu said.

BYD would 'find suitable channels' to meet funding needs 'based on market conditions', he said.

Investors cheered news of the bond sale yesterday, helping BYD claw back some of this week's losses. The stock rose 3.8 per cent yesterday to close at HK$15.98 - down 20 per cent from the previous week's close.