Bizlink Holdings, a California-headquartered and Taiwan-listed cable manufacturer, raised $60 million on Wednesday after completing the first internationally-marketed, US dollar-denominated Taiwanese convertible bond sale in seven months.
The transaction is the first Reg S equity-linked issuance out of Taiwan since United Microelectronics Corp’s $600 million deal in May last year.
The unrated issuer, a supplier of charging cables and USB connectors to car and computer manufacturers, is almost unknown to international investors and there is no analyst coverage of the stock by international banks and brokerages. Sole bookrunner JP Morgan was nonetheless able to draw in robust demand after sounding out the transaction and educating investors about the company several weeks ahead of launch.
“The deal is small but it is a very successful transaction considering the low profile of the company internationally and the impressive pricing it has achieved, particularly a conversion price that well exceeds the stock’s all-time high,” a source familiar with the situation told FinanceAsia.
The initial marketed terms of the five-year zero-coupon deal include a yield-to-put/maturity of 1% to 1.5% and a fixed conversion premium of 15% over the stock’s Wednesday closing price, translating into a conversion price of NT$179.4. The bond features a rare two-year put option marketed at 102.02% to 103.03% and redemption price at 105.11% to 107.76%.
There is no standard call option attached to the bond but there is a clean up call and full dividend pass through.
Some price sensitivity was seen in the early hours of the bookbuild but the majority of the investors eventually put in strike bids. That allowed the company to settle the final terms at the best end of guidance, with a 1% yield-to-put/maturity, put price of 102.02%, and redemption price of 105.11%.
To facilitate the transaction Bizlink lined up asset swaps for the full deal size at 250 basis points, which was understood to have been mostly used up by investors. The book was well-covered with approximately 20 lines, including both international outrights and hedge funds, and a number of accounts zeroed out, the source familiar with the situation said.
A $20 million upsize option was not immediately exercised but it could be used within 30 days after the closing date, expected to be around February 3.
Underlying assumptions include a credit spread of 250bp and a fairly high stock borrow cost of 5%, because such borrows are almost unavailable in the market. That derives a bond floor of 95% and an implied volatility of 21%.
At the final price the theoretical value of the bond is around 107%, assuming volatility of 35%.
In secondary market trading on Wednesday the bond was at par despite trading up at 100.375%/101.125% in the grey market a day earlier. One market participant said trading was limited, considering that a large part of the option might have already been swapped.
Bizlink is no stranger to equity-linked issuance having printed its maiden NT$200 million ($6 million) domestic convertible bond in 2014. But while the new issue is much larger in size, it is also an important step for Bizlink to grow its international profile.
The strategy is in line with Bizlink’s expansion to supply its products to more international brands. It is one of the key suppliers of charging cables to automobile manufacturers such as Tesla and BMW, and also of USB connectors to PC makers including Dell, Hewlett-Packard, and Microsoft.
Bizlink's share price has traded up by 60% in the past 12 months despite an 18% decline in the benchmark TWSE Index.
