China Power International Development (CPI) has raised Rmb1.14 billion ($180 million) from the sale of a five-year US dollar-settled convertible bond, and raised HK$930.8 million ($120 million) from a concurrent top-up equity placement.
The deal met with robust demand, leading the bookrunners to exercise the $30 million upsize option in full for both the CB and the placement, allowing them to increase the size to $180 million and $120 million, respectively. The total size of about $300 million represents 20% of the company’s market cap of about $1.5 billion.
CPI’s deal followed a couple of successful CB deals in the last few weeks. Early this month, Taiwan’s Cathay Financial raised $254 million from a two-year zero coupon CB, which came after a period of absence of new CBs in Asia since the end of May. CapitaCommercial Trust priced a $141 million five-year convertible bond early last week.
CPI, which is led by Li Xiaolin, the daughter of former Chinese premier Li Peng, is listed in Hong Kong but is backed by one of China’s top five power-generating groups, the state-owned China Power Investment Corp. The group’s principal business involves investment, development, operation and management of coal-fired power and hydropower plants in China.
The deal was launched at 5.30pm on Thursday, Hong Kong time, and the books were closed at 8pm.
The deal was structured with a placement to give an immediate boost of liquidity to the company’s little-traded stock. The discount it offers will be offset by the premium of the CB to improve the valuation, a source said on Friday. The free-float of the company is about 30%, while the rest is owned by SOEs.
The latest fundraising activity came after CPI reported earnings early last week. For the first half of 2012, its revenue reached about Rmb9.1 billion, or an 11.2% increase from the same period last year, and profit attributable to owners of the company was about Rmb547.8 million, a 33.1% jump from last year.
The deal secured anchor orders that mostly comprised outright investors and, once it was launched, a lot of hedge funds also came in. In the end, the book was allocated evenly to outright and hedge fund investors, the source said, with large participation from Asian accounts, as well as Europe and some from the rest of the world.
For the placement portion, CPI offered 443.2 million shares for HK$2.1 each (the reference share price), giving it a 7.1% discount over Thursday’s closing price of HK$2.26. It was marketed in a range between HK$2.04 and HK$2.16, which translated into a discount of 4.4% and 9.7%. The base size was $90 million with an upsize option of $30 million.
The CB has a five-year maturity with an investor put in the third year. It had a base size of $150 million with an upsize option of $30 million, and was offered with a coupon ranging from 2.5% to 3% and a conversion premium of 15% to 25%. The deal resulted in a 2.75% coupon and a 20% premium above the reference share price. The premium translates into an initial conversion price of HK$2.52.
The CB was marketed with a credit spread of 300bp and has a conversion price adjustment for all cash dividends. With no borrow available, participants were using 500bp as a borrow cost, the source said. The final terms gave a bond floor of 92.3% and an implied volatility of 22% to 23%.
CPI’s stock ended Friday’s trade down 4.4% at HK$2.16, remaining above the placement price. The stock has gained about 22% so far this year, compared to a 9% rise on the Hang Seng Index during the same period.
The company said in a statement that it plans to use the proceeds to fund future capital expenditure, to repay existing borrowings and for general working capital.
The deal was arranged by Credit Suisse and Deutsche Bank.
Last year, CPI raised Rmb982 million ($150 million at the then exchange rate) from the sale of renminbi-denominated but US dollar-settled convertible bonds. The deal then also met with a lot of interest from both hedge funds and outright accounts, and ended up exercising an upsize option in full as well.
