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The Guangdong province-based company would sell the bonds in two tranches at an amount of HK$8.62 billion for each, with the first one maturing in May 2027 and the second one due in May 2033, Midea said in a statement to the Hong Kong exchange on Thursday. The bonds have zero coupon rates and do not bear interest, it said.
“The board considers that the issue of the bonds represents an opportunity to potentially enlarge and diversify the shareholder base, to improve the liquidity position, to reduce the financing costs and to raise further working capital,” the company said in the statement.
A flurry of Chinese companies are offering convertible bonds, which bear low borrowing costs, as sentiment on the stocks improves with the easing of tensions in the Middle East. Convertible bonds are securities that can be converted into shares at a predetermined price, typically set at a premium to the stock price. When share prices are high, issuers can set a higher conversion price, and investors gain more confidence that the stock will rise enough to make conversion worthwhile.
Midea shares slid 2.9 per cent to HK$85.15 in Hong Kong on Thursday morning.
Upon maturity, the 2027 bond can be converted into stocks at the price of HK$96.82, representing a 10.4 per cent premium to Midea’s close price on Wednesday, the statement said. Meanwhile, the conversion price of HK$115.76 for the 2033 bond commanded a 32 per cent premium to Wednesday’s close price, it said. If fully converted, the shares would account for about 22 per cent of Midea’s enlarged Hong Kong-listed stocks, according to the statement.
