Hong Kong-listed Shenzhen International Holdings has raised HK$600 million ($76.8 million) from the sale of zero-coupon five-year convertible bonds through JPMorgan.<.p />
The bonds were issued at par and are convertible into company shares at HK$0.341 each, a 20.5% premium over the reference price, which is equal to yesterday's volume weighted average price of HK$0.283. Each bond will convert into 29,325.513 shares.<.p />
Investors can put the bonds back to the issuer at the end of year three at 112.451% of face value and if not converted they will be redeemed at 121.601%, giving a yield to put and a yield to maturity of 3.95% per annum. The maturity date is February 24, 2011.<.p />
There is also an issuer call at the end of year three, subject to a 130% hurdle.<.p />
The pricing assumes a credit spread of 140bp over Libor, a 1.5% dividend yield and a stock borrow cost of 5%, which is theoretical since the stock cannot be sold short. This gives a bond floor of 94.5% and an implied volatility of 25.5%.<.p />
The historical volatility is more than 35%.<.p />
The infrastructure sector gets a lot of focus at the moment and sources said there had been good interest for the bonds given the relatively low conversion premium for a pure infrastructure play that is located in a high growth region.<.p />
According to one investor approached about the deal, the order book was said to be more than two times covered.<.p />
The company, which is 43% owned by the municipal government of Shenzhen and acts as its holding company for infrastructure projects, benefits from the heavy flow of cargo traffic between Hong Kong and Shenzhen through its 30% stake in Shenzhen Expressway.<.p />
It also operates logistics parks for loading and unloading of cargo and the transfer of goods from large to small trucks and vice versa. Proceeds will be used for general corporate purposes, including the funding of selected acquisition opportunities of logistics infrastructure projects in China.<.p />
Shenzhen International's share price rose 2.5 cents, or 5.5%, yesterday to $0.29 and is up 18.4% in the past three months.<.p />
