Abu Dhabi-backed Nio to issue US$1 billion in convertible senior notes to pare debt, boost cash reserves
- Nio to issue two batches of US$500 million notes, convertible to American depositary shares maturing in 2029 and 2030
- While Nio has reported rising sales in the past two months, the EV maker has seen losses widen by 27 per cent in the second quarter
The Shanghai-based carmaker said in filings to the Hong Kong and New York stock exchanges on Tuesday that it would issue two batches of US$500 million notes, convertible to American depositary shares (ADS) maturing in 2029 and 2030.
The fundraising comes three months after Nio received US$740 million from Abu Dhabi government-backed firm CYVN Holdings through a share placement.
“The company plans to use a portion of the net proceeds from the notes offering to repurchase a portion of the existing debt securities, and the remainder mainly to further strengthen its balance sheet position as well as for general corporate purposes,” Nio said in the filing.
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The interest rate, initial conversion rate and other terms will be determined at the time of pricing of the notes, Nio said.
Nio, which did not provide a time frame for the issuance, may set the coupon at up to 4.75 per cent, Bloomberg reported on Tuesday, citing a source it did not identify.
Nio’s Hong Kong-listed shares fell 4.4 per cent to HK$78.40 on Tuesday.
The Chinese trio’s sales trail Tesla’s Model 3 and Model Y vehicles in the world’s largest EV market crowded with nearly 200 players, where mounting worries about severe overcapacity are forcing them to ramp up deliveries to survive the cutthroat competition.
Among the three, only Li Auto has turned a profit due to strong sales of its sport-utility vehicles (SUVs) such as the L7 and L8 that boast of extended-range battery technology, giving them a driving range of more than 1,000km.
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“It is a must for Chinese EV start-ups to preserve cash and lower their leverage ratios to ensure their financial health,” said Zhou Ling, a fund manager with Shanghai Shiva Investment. “Quite a lot of small players may not be able to stay afloat in the coming one or two years due to price competition.”
Nio was one of the main victims of a price war in the mainland’s car industry earlier this year as the company kept prices of its premium EVs almost unchanged.
The carmaker saw sales rebound strongly from June when the price war came to an end.
In July, Nio delivered a record 20,462 EVs, followed by 19,329 units last month.
On September 15, the company began taking orders for its new EC6 coupe SUV, completing an upgrade of all its older models.
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At the end of August, Nio reported its net loss for the second quarter ended June had widened by 27.8 per cent year on year to 6.1 billion yuan (US$836 million). Revenue slipped 14.8 per cent to 8.77 billion yuan.
The company, however, was upbeat about its outlook, saying it would deliver 55,000 to 57,000 vehicles to Chinese customers between July and September, an increase of at least 74 per cent from a year ago.
Investment bank Jefferies remained sceptical, noting that while the price cuts had boosted sales could Nio maintain the momentum.
“Sales channel and capacity expansion, combined with construction of battery swap stations, could cloud the margin outlook in the second half,” Jefferies said in a note on August 31, following Nio’s earnings release.
