China Railway Construction issues $500m convertible bond

The Chinese developer has tapped international investors to help fund its day-to-day operations and finance expansion.

State-owned China Railway Construction Corporation (CRCC) has issued $500 million worth of H-share convertible bonds to fund business operations and provide fuel to its expansion strategy. 

The zero-coupon, zero-yield bond provided a conversion price at HKD10.3 (€1.22; $1.32), a premium of 37.5 percent relative to CRCC’s close of HKD7.49 on 18 January, the day it priced. 

Due in 2021, the convertible bond features a three-year put option and is redeemable at par, according to a filing at Hong Kong Exchange. 

Demand is understood to have been sustained thanks to the stock’s high liquidity and abundant stock borrow. The book closed about twice covered overall. 

The net proceeds from the offering, after the deduction of fees, commissions and other expenses, will total about $496 million. The company plans to use the money to fund domestic and overseas projects, investment, potential mergers and acquisitions, replenish working capital and repay bank loans. 

“The board considers that the issuing of the bonds represents an opportunity to potentially enlarge and diversify the shareholder base of the company, to improve the liquidity position of the group, to reduce the financing costs of the group and to raise further working capital for the company,” the company said in the filing. 

JP Morgan, CICC and UBS were the joint lead managers for the transaction. 

The last equity fundraising activity by CRCC dated back to 17 December 2014, when it raised CNY1.242 billion (€173 million; $189 million) by selling A-shares at CNY8 per share to 10 subscribers to finance domestic projects and repay loans. 

CRCC agreed last month to renovate 644-kilometre of rail lines and 22 railway stations in Mali for $1.486 billion. 

China plans to invest CNY800 billion in railways in 2016, with a focus on its lesser developed central and western regions, according to official Chinese news agency Xinhua.