Lenovo issues US$2 billion convertible bonds to Saudi Arabia sovereign fund to finance debt repayment, expansion
- Lenovo’s bond plans emerge days after similar offerings by Alibaba and JD.com with the net proceeds to be used for repaying debt, funding its Saudi expansion
- More overseas-listed Chinese companies could follow suit, according to UBS, as they seek to lower funding costs in a high interest rate environment
Lenovo, the world’s largest PC maker, is raising US$2 billion by issuing zero-coupon convertible bonds to a unit of Saudi Arabia’s sovereign wealth fund, close on the heels of similar offerings made by e-commerce giants Alibaba and JD.com as issuers seek to lower funding costs.
The three-year bonds will pay no interest but give the investor, Alat, a subsidiary of the Saudi Arabia’s Public Investment Fund (PIF), the option to convert its holdings into shares at an initial conversion price of HK$10.42 per share on the maturity date. This represents a discount of around 12 per cent from Tuesday’s closing price, and the conversion of the entire holdings would release an additional 1.5 billion shares into the market or around 12.09 per cent of the capital base as of the announcement date.
Alat has also entered into a strategic collaboration with the Chinese laptop maker, to help enhance its presence and spur growth in the Middle East and Africa markets, according to a stock market filing.
The net proceeds will be used for repaying debt as well as for funding general corporate and working capital purposes, Lenovo said. The company also announced a plan to set up a regional headquarters and a new manufacturing facility in Saudi Arabia.
“The company expects to have greater financial flexibility to implement its proven strategy, and will further drive its global transformation into a solutions and services-led business,” Lenovo said.
