(Bloomberg) — Equity-linked debt issuance by Asian companies is set to be the busiest quarter since March 2022, with Chinese electric-vehicle maker Neo Inc’s $1 billion convertible bond.
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Including Neo’s latest deal, proceeds raised by regional borrowers on such notes reached $12.8 billion, the most since the first quarter of last year, according to data compiled by Bloomberg. The Chinese automaker’s offer is the largest among Asian companies since South Korea’s LG Chem Ltd struck a $2 billion deal in July.
The rise in equity is a testament to the popularity of equity-linked bonds in an environment of rising interest rates, and investors’ strong interest in the underlying stock price appreciation. Hybrid instruments provide companies with an alternative financing tool to traditional equity financing during difficult times.
Shanghai Neo, which is listed in New York, Hong Kong and Singapore, priced two tranches of dollar convertible notes maturing in 2029 and 2030, respectively. The coupon is as high as 4.625 percent. The company also announced plans to repurchase a portion of its existing debt securities from the proceeds and other objectives.
Neo shares in Hong Kong fell as much as 14% on Wednesday, the biggest intraday loss since March, as the conversion premium on offer appeared attractive enough for investors to sell the stock and buy equity-linked notes.
“Some NEO equity holders may choose to sell their equity and buy convertible bonds,” said Steven Leung, managing director of UOB Kai Hian Hong Kong Ltd. The decline shows the company’s urgency to raise funds.
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