Lenovo said it plans to sell $2 billion in zero-yield convertible bonds to Saudi Arabia’s sovereign wealth fund, becoming the latest Chinese company to seek to raise funds through such a bond issue in just a few days.
The company set the initial conversion price for the bonds at HK$10.42 per share, according to a stock exchange filing. Lenovo shares closed at HK$11.82 on Tuesday.
The bonds will be issued to Al-Alat, an investment company backed by Saudi Arabia’s Public Investment Fund, which has struck a strategic deal with PC maker Lenovo.
As part of the agreement, the Beijing-based manufacturer of personal computers and artificial intelligence servers plans to build an R&D center in Riyadh and expand production capacity in the region.
Upon maturity, the new shares will represent approximately 12% of Lenovo's existing share capital, or approximately 11% of the Company's new share capital after adding the shares converted from the bonds.
Separately, the computer maker said it has proposed issuing three-year bonds worth HK$1.15 billion at an issue price of HK$1.43 to raise additional funds. The issue will be under a specific mandate.
In a high interest rate environment, convertible bonds are becoming more popular than regular debt. Issuing convertible bonds instead of stocks can help keep stock prices more stable than issuing new stocks which dilutes the ownership of existing shareholders.
Last week, Alibaba Group Holding Ltd. sold $4.5 billion in convertible bonds, a record for a dollar-denominated convertible bond by an Asian company, with a portion of the proceeds to be used to buy back shares. It came just days after rival e-commerce company JD.com Inc. sold a total of nearly $2 billion in such bonds.
