Chinese delivery firm ZTO Express raises $870 mln in convertible bonds (updated)

ZTO Express (Cayman)

25/08/2022 06:55

(Adds details, analyst comment, Hong Kong share price)
    By Scott Murdoch and Xie Yu
    HONG KONG, Aug 25 (Reuters) - ZTO Express (Cayman) Inc
 ZTO.N  raised $870 million by issuing convertible bonds and the
Chinese delivery firm plans to use the proceeds to bolster its
logistics operations, regulatory filings showed on Thursday.
    The deal came less than a day after ZTO said in a Hong Kong
stock exchange announcement that it had no intention to carry
out fresh fundraising after a proposed transaction was flagged
in its unaudited first-half results filed to the U.S.
regulators.
    In its Hong Kong filing on Wednesday, ZTO said its US
filings "contained erroneous references to a proposed offering"
and that it "would like to clarify that it currently has no
intention to conduct any offering of its securities."
    The bond offering was launched later in the day during the
U.S. trading session. ZTO is listed in both the United States
and Hong Kong. Its New York shares dropped 9.1% on Wednesday.
    ZTO's Hong Kong stock  2057.HK  was last down 9.27% on
Thursday in a trading session shortened by a typhoon.
    "Market generally dislikes convertible bond due to its
potential dilution impact on the existing shareholders. To make
things worse, ZTO messed up the communications completely,"
Bernstein analysts wrote in a research report. 
    "The contradictory messages not only created confusion to
investors, but has also taken a toll to the company's
credibility. Investors attempted to read between the lines, and
questioned the use of funding stated in the announcement."
    ZTO said the proceeds would be used to enhance logistics
operations and for working capital purposes, among other things.
    The company did not immediately respond to Reuters' request
for comment. Goldman Sachs  GS.N , which advised the company on
the deal, declined to comment.
    The U.S. Securities and Exchange Commission did not respond
after business hours. The Hong Kong Stock Exchange and the
Securities and Futures Commission declined to comment.  
    ZTO's convertible bonds are priced at a coupon of 1.5% and
carry a conversion premium of 30%, according to the company's
filings. The company estimates net proceeds from this offering
will be around $855 million. 
    The notes are due in 2027, but holders will have the right
to require ZTO to repurchase for cash all or part of their notes
in 2025, according to the term sheet.
    The deal carries a greenshoe option, which allows buyers to
purchase up to an additional $130 million in aggregate principal
amount of the notes.    

 (Reporting by Scott Murdoch and Xie Yu; Editing by Sumeet
Chatterjee and  Subhranshu Sahu)
 ((Yu.Xie@thomsonreuters.com;))