China’s blockbuster convertible debt sale draws bids equal to size of Indonesia’s economy as investors seek safer bets
- Investors place 7.8 trillion yuan of orders for Shanghai Pudong Bank’s convertible bond offering, more than 300 times oversubscribed
- The Shanghai lender plans to raise up to 50 billion yuan in what would be China’s biggest-ever sale of bonds that can be converted into stocks
Shanghai Pudong Bank is attracting blockbuster demand from investors for what could be China’s biggest sale of convertible bond offering as investors flock to safer bets amid softening economic outlook.
The lender is seeking to raise 50 billion yuan (US$7.1 billion) of securities that can be converted into equity to help replenish its capital, according to an exchange statement. Shanghai Pudong Bank has received 7.8 trillion yuan of orders for half of the securities on offer, representing an oversubscription rate of more than 300 times. The other half has been set aside for existing shareholders.
The offering will lock up the equivalent of US$1.1 trillion cash, almost four times the market value of top lender Industrial and Commercial Bank of China, or the size of Indonesia’s gross domestic product, the biggest economy in Southeast Asia.
The convertible debt is rated AAA and coupon will incrementally rise to 4 per cent when the bond matures in the sixth year, the bank said. Successful bidders will be announced on November 1. Citic Securities and Guotai Junan Securities are the sponsors of the debt offering.
The frenzy underscores rising demand for safer assets and cautious sentiment on Asia’s largest stock market as traders snapped up bank stocks in the face of US-China trade war and faltering economic growth. China’s growth slowed to 6 per cent last quarter, the government said, the slowest since records began in March 1992.
