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HONG KONG (Reuters) – Chinese video streaming service iQIYI Inc. is looking to raise $ 1.05 billion in convertible bonds, the latest example of the growing popularity of this instrument among Chinese technology companies recently listed on the stock exchange.
The iQiyi Inc. Chinese streaming platform logo appears on a screen during its IPO on the Nasdaq Market in New York, USA on March 29, 2018. REUTERS / Brendan McDermid
iQIYI announced Tuesday the sale of its convertible bonds to six years, without revealing the terms.
According to the terms consulted by Reuters, the bonds were being marketed with an indicative coupon range of between 2% and 2.5%. The company hopes to reduce its borrowing costs compared to its last convertible bond, which had a shorter term and a higher coupon.
The deal also provides for an over-allotment option, or greenshoe, of up to $ 150 million, which means that the total size could reach $ 1.2 billion.
Convertible bonds are a less expensive avenue of financing because of the reduction of their coupons in exchange for the grant to the holder of the obligation to convert the debt into shares of the company at a fixed price in the future. Bonds provide investors with fixed returns and the equity link provides the opportunity to benefit from an increase in the share price of the issuer.
Convertible bond sales have reached their highest level in Asia since last year's financial crisis, with $ 35.5 billion raised, according to Refinitiv data, due to market volatility and volatility. rising borrowing costs.
IQIYI offered a conversion premium of between 27.5% and 32.5%, depending on the condition sheet.
His shares closed at $ 24.02 Monday, almost half their record of $ 46.23 reached in June.
This is the second time that the Netflix streaming service sells a convertible bond, both in the year of its Nasdaq IPO ($ 2.4 billion) in March 2018. In November, he sold a $ 750 million convertible bond coupon of 3.75 percent.
Technology companies looking for growth capital are turning more and more to convertible bonds as a means of borrowing cheaper, as companies are often not rated and their stock prices are more volatile.
Electric vehicle maker NIO raised $ 650 million in convertible bonds five years earlier this year, just four months after its IPO in New York.
Bank of America, Merrill Lynch, Goldman Sachs and JPMorgan are co-authors of the contract with iQIYI.
The transaction will close after the closing of the New York markets on Tuesday.
Report by Julia Fioretti; Edited by Muralikumar Anantharaman
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