TVB buys US$83 million convertible bond in mainland theatre operator SMI

Television Broadcasts (TVB), Hong Kong’s main free-to-air broadcaster, has bought a US$83 million (HK$651.55 million) convertible bond in mainland cinema operator SMI Holdings Group, according to a stock exchange filing on Thursday.

The bond has a principal of US$83 million with an interest rate of 7.5 per cent per annum for a term of two years, extendable to three years subject to the parties’ mutual agreement.

TVB can exchange the bond for shares at an initial conversion price of HK$3.85 per share. The conversion price represent a premium of about 13.24 per cent over SMI’s closing price Wednesday when the deal was made, and represents a 17.02 per cent premium over the average closing price in the previous five trading days.

“Taking into account that the interest rate of the convertible bonds is generally more favourable and higher than the interest rate of fixed deposits offered by well-recognised financial institutions in Hong Kong … the board considers that the convertible bond subscription can broaden the group’s source of income and provide the group with a stable investment return,” TVB said in the stock exchange filing.

“Accordingly, the directors, including the independent non-executive directors, consider that the terms of each of the transaction documents are fair and reasonable and the convertible bond subscription is in the interests of the company and shareholders as a whole.”

SMI, a listed company in Hong Kong which is 67 per cent owned by Qin Hui, operates cinemas, online shopping and in-theatre counter sales, as well as an advertising and promotions business in mainland China.