Chow Tai Fook Jewellery offers US$1 billion convertible bond
[HONG KONG] Henry Cheng's Chow Tai Fook Jewellery Group is seeking HK$7.85 billion (S$1.3 billion) through the sale of one of Hong Kong's biggest convertible bonds this year.
The convertible bonds, denominated in Hong Kong dollars, will be due around the end of June 2030, and will carry a coupon of zero to 0.5 per cent payable semiannually, according to terms of the deal seen by Bloomberg News. Proceeds will be used for the jewelry business and general working capital, according to the terms.
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 bookrunner 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.
The bonds carry a conversion premium of 35 to 45 per cent over the clearing price of that placement, which is known as a Delta placement. The bonds are convertible at any time from Jun 30, 2028, according to the terms. There is a lockup of 90 days on the company.
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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