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BYD, the mainland carmaker partially owned by Warren Buffett's Berkshire Hathaway, has raised HK$4.27 billion by selling new shares to lower debt leverage and cut financing costs.
The company sold 121.9 million Hong Kong-listed shares - equivalent to 5.18 per cent of the existing number of issued shares - at HK$35 each, a discount of about 14.95 per cent to the last traded price of HK$41.15 before trading in the stock was halted at noon yesterday.
It was at the low end of the HK$35-HK$37 price range pitched to investors.
BYD said in a statement to Hong Kong's stock exchange last night the share sale would "optimise its capital structure" and "enrich its shareholder base".
The company highlighted in the announcement that its business development focus this year would be on "new energy" vehicles.
"The directors believe that new energy vehicles are the future of the automobile industry," it said.
The proceeds will give Shenzhen-based BYD room to step up investments and bolster production of electric vehicles as governments worldwide increase efforts to fight pollution.
Pranab Kumar Sarmah, an analyst at AM Capital, wrote in a report in March that BYD would probably need to raise money from the capital markets because of the company's deteriorating financial health.
BYD has gained 8.3 per cent this year, while the Hang Seng Index has fallen 1.5 per cent.
Shares of companies typically fall when they disclose large issuances of new stock because they dilute the value of existing shares.
The sale comes after BYD reported that profit plunged 89 per cent year on year in the first quarter because of declining demand for its petrol-fuelled vehicles.
Last year, earnings jumped almost sevenfold after its founder and chairman, Wang Chuanfu, completed a three-year reorganisation during which he reduced the number of dealerships and narrowed losses at its solar business.
The company had reason to raise funds through shares over bonds or loans. Its net debt, or interest-bearing borrowings minus cash and equivalents, climbed 34 per cent to a record 20.3 billion yuan (HK$25.2 billion) at the end of last year.
Dividing that by equity, which is how the company calculates its key gearing ratio for monitoring capital, the proportion of net debt bloated to 94 per cent from 71 per cent in 2012.
BYD shares rose 63 per cent last year and is this year's fourth-best performer on the H-share index. On March 17, the stock climbed to a three-year high of HK$55.35.
MidAmerican Energy, a Berkshire Hathaway unit, is BYD's biggest strategic partner, owning 28 per cent of the Hong Kong-listed stock.
Additional reporting by Eric Ng


Chinese carmaker BYD offering US$400m in new shares

A Denza electric car, a joint-venture product by Germany's Daimler Benz and China's BYD, on display at a mainland car show. Photo: EPA

Business

China Business

The funds would allow the Shenzhen firm to strengthen the production of electric vehicles


BYD, the mainland carmaker partially owned by Warren Buffett's Berkshire Hathaway, has raised HK$4.27 billion by selling new shares to lower debt leverage and cut financing costs.


Chinese carmaker BYD offering US$400m in new shares

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}The funds would allow the Shenzhen firm to strengthen the production of electric vehicles

The funds would allow the Shenzhen firm to strengthen the production of electric vehicles