Yue Xiu Enterprises finalises US$200m equity-linked bond issue
Take-up for US$200m deal highlights attraction of equity-linked offerings as interest rates rise
Yue Xiu Enterprises, wholly owned by the Guangzhou municipal government, yesterday finalised a US$200 million, five-year bond exchangeable into shares of Hong Kong-listed Yuexiu Transport Infrastructure.
The twice-covered offer was increased from an initial US$150 million, underscoring investors' continued keen interest in the equity-linked instrument.
The equity-linked market in Asia generally - and in China particularly - was on its deathbed in 2012, but recovered strongly in 2013. That recovery continues this year as Chinese firms have issued US$5.4 billion in offshore equity-linked deals in the year to date, a threefold rise over the same period last year, according to Thomson Reuters.
Issuers are moving towards equity-linked deals as interest rates slowly rise, as the instrument lets them trade an equity option for a reduced coupon. Investors are embracing the instrument as a stepping stone away from fixed-income investments to higher-risk equities as the global economy improves.
The five-year bond pays a 1.5 per cent coupon and is exchangeable into Yuexiu Transport shares at a 10 per cent premium. Investors can put the deal at 2.5 years.
