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Mega Convertible Bond Issue in the Works

Hong Kong and Shanghai listed China Shipping Development is planning a RMB 3.95 billion (USD 602 million) convertible bond issue. That could be the largest convertible offering by an Asian shipping company ever. The oil and bulk carrier division of state-owned China Shipping Group plans to make use of the six year bond proceeds to finance the construction of 19 new buildings – namely three 110,000 dwt oil tankers, eight 48,000 dwt oil tankers, two VLCCs and six 76,000 dwt bulk cargo carriers. The offering is only available exclusively to Chinese investors and existing holders of Shanghai listed shares or “A” shares of the company will be given preferential rights to subscribe for the bonds. The proposed convertibles will be marketed with an annual coupon range of 0.5% to 3% and are expected to be listed on the Shanghai Stock Exchange.

Unlike in many jurisdictions, companies raising money in China are required to list down the intended use of bond proceeds in greater detail and bondholders have a one-off right to ask for a partial or full redemption, should there be any material change. In a statement to the stock exchange, the company said the convertible bond issue will allow the company to pay a lower interest coupon payment than a straight bond issue and would not lead to any immediate dilution of the company’s basic earnings per share which would arise in the case of a new issue of shares.

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Written by: | Categories: Asia, Bonds | February 10th, 2011 |

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