Chow Tai Fook Jewellery upsizes convertible to HK$8.8 billion
[HONG KONG] Henry Cheng's Chow Tai Fook Jewellery Group has increased the size of its convertible bond sale to HK$8.8 billion (S$1.4 billion), according to sources familiar with the matter, making it potentially one of Hong Kong's biggest this year.
The bonds due in 2030 are poised to be priced with a 0.375 per cent coupon and a 35 per cent conversion premium, the sources said, asking not to be identified as the information is not public. The deal was originally marketed to raise HK$7.85 billion, according to terms seen earlier by Bloomberg News.
The offering drew orders for multiple times the number of bonds available, one of the sources said. Representatives for Chow Tai Fook did not immediately respond to requests for comment made outside normal business hours.
Chow Tai Fook, which recently reported better-than-expected earnings, has been campaigning to lift its image, positioning itself closer to premium labels such as Tiffany and Cartier instead of a traditional gold retailer.
The offering comes as New World Development, which is controlled by the same family controls Chow Tai Fook, grapples with more than HK$200 billion of liabilities as Hong Kong's most indebted major developer.
UBS Group, the sole book-runner of the deal, is proposing to conduct a share placement aimed at facilitating hedging for investors buying the bonds, according to the terms. As part of that placement, Chow Tai Fook will buy back as much as HK$1.57 billion of shares.
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The convertible bonds were originally marketed with a coupon of 0 to 0.5 per cent payable semiannually, and a conversion premium of 35 to 45 per cent over the clearing price of the placement, which is known as a delta placement, the terms showed earlier. Proceeds will be used for the jewellery business and general working capital.
Chow Tai Fook shares rose 6 per cent to HK$13.72 in Hong Kong on Monday (Jun 16) before news of the sale emerged. The stock has doubled this year after falling 42 per cent last year.
Meanwhile, Asia has seen a string of issuance of bonds convertible into stock this year. Singapore's Grab Holdings last week raised US$1.5 billion in a convertible-bond deal that brought in more cash than initially expected. Ping An Insurance (Group) of China earlier this month sold HK$11.8 billion in such bonds.
Like Chow Tai Fook, Ping An Insurance also denominated its convertibles in Hong Kong dollars. The currency has slumped in recent weeks towards the weak end of its official trading band against the greenback, after local interest rates fell to a three-year low and widened the discount to their US peers to rarely seen levels. BLOOMBERG
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