China Evergrande switches to convertible bonds at last minute, pares it down to US$2.3 billion
The developer had to drop perpetual bond offer, which would have helped it deleverage
China Evergrande Group will issue a HK$18 billion (US$2.3 billion) 5-year convertible bond, pricing it at 4.25 per cent, revising down from a US$2.96 billion perpetual bond initially mooted, it said in a stock exchange announcement on Wednesday.
The convertible bonds, due February 2023, was priced at the top end of the indicative range pitched by banks involved in the deal, according to the revised term sheet.
The indicative range was revised upwards from 3-4 per cent earlier as reported by the South China Morning Post on Tuesday.
Initially, on Tuesday the joint-bookrunners of the deal – Citigroup, Haitong International Securities Group, Credit Suisse, Bank of America, UBS and Deutsche Bank – were pitching a more aggressive structure through issuing convertible perpetual securities, according to the term sheet seen by the Post.
Investors in such equity-linked instruments would have no guarantee that the issuer would pay a coupon because perpetual securities typically carry a coupon deferral option.
But, “if [China Evergrande] had pressed on with the convertible perpetual bond deal it would have been done at a much smaller size. Hence, the issuer focused on maximising the proceeds raised by tweaking the structure,” said a source close to the deal.