VIDEO streaming service iQIYI Inc. is looking to raise US$1.05 billion in convertible bonds, the latest example of the growing popularity of the instrument among newly listed Chinese tech companies. The company announced the sale of its six-year convertible bonds yesterday, without disclosing the terms. A term sheet seen by reporters showed the bonds were being marketed with an indicative coupon range of between 2 percent and 2.5 percent. The company is hoping to lower its borrowing costs compared to its last convertible bond which had a shorter tenor and higher coupon. The deal also has an overallotment option of up to US$150 million, meaning the total size could reach US$1.2 billion. Convertible bonds are a cheaper funding avenue due to their lower coupons in exchange for giving the bond holder the option of converting the debt into company shares at a set price in future. Sales of convertible bonds hit their highest level in Asia since the financial crisis last year, with US$35.5 billion raised, according to Refinitiv data, driven by market volatility and rising borrowing costs. According to the term sheet, iQIYI was offering a conversion premium of between 27.5 percent and 32.5 percent. It is the second time the Netflix-like streaming service is selling a convertible bond, both within a year of its US$2.4 billion Nasdaq initial public offering (IPO) in March 2018. In November it sold a US$750 million five-year convertible bond with a coupon of 3.75 percent. Technology companies in search of growth capital have increasingly turned to convertible bonds as a way of raising cheaper debt, given the companies are often unrated and have more volatile stock prices. E-vehicle maker NIO raised US$650 million in a five-year convertible bond earlier this year, only four months after it went public in New York.(SD-Agencies) |