June 22 (Bloomberg) -- Gome Electrical Appliances Holdings Ltd., the Chinese retailer whose billionaire founder is under investigation for economic crimes, plans to raise as much as $447 million from investors including Bain Capital LLC.

China’s second-biggest electronics retailer will sell 1.59 billion yuan ($233 million) worth of convertible bonds to a Bain affiliate and raise as much as HK$1.66 billion ($214 million) selling shares to stockholders for 40 percent less than the last traded price, according to a Hong Kong stock exchange filing.

Beijing-based Gome gains cash to finance new stores and repay debt easing “funding pressures” following the police probe in November of former Chairman Huang Guangyu, once China’s richest man. Gome shares resume trading tomorrow after a seven- month halt, having plunged 77 percent last year.

“Securing funds is the main concern for Gome,” Fiona Wong, a Hong Kong-based analyst at Sun Hung Kai Securities Ltd., said before the announcement. “Once they have the funds, then they can see how to restructure their operations and stores.”

The electronics retailer will focus on opening “mega stores” this year to use floor space more efficiently, Chairman and Chief Executive Officer Chen Xiao said at a press briefing in Hong Kong today. The company, with 859 stores at the end of 2008, will relocate or close unprofitable outlets and slow store openings this year, he added.

‘Pressures From Banks’

“The company faced some funding pressures from banks and from other sources” in the past seven months, Chen said. “We took steps to mitigate the pressures by quickening the pace of inventory turnover and cash flow.”

Chen said the last time he saw Huang in person was in October, without revealing further details.

Bain Capital Glory Ltd. will subscribe to seven-year, 5 percent coupon bonds that can be converted into a 12.8 percent stake in Gome, a separate statement today said.

The Boston-based buyout company is investing in Gome because it sees “extraordinary growth opportunities” in China’s consumer and retail industries, it said in a statement today. Gome is “one of China’s leading retail franchises,” said Bain, which will nominate three non-executive directors to the Hong Kong-listed company’s board.

Gome will offer shareholders new stock at 67.2 Hong Kong cents each. Investors can acquire 18 shares under the open offer for every 100 they already own, the company said.

Largest Shareholder

Bain will underwrite the transaction and has “conditionally agreed” to acquire shares that stockholders don’t purchase. The stock last traded at HK$1.12 in November.

Bain will own between 9.8 percent and 23.5 percent of Gome after its share capital is enlarged by the transactions, the retailer said in a separate statement sent by e-mail today.

Huang, who can participate in the open offer, will probably remain Gome’s largest shareholder, Jonathan Zhu, a Hong Kong- based managing director at Bain, said at a briefing today.

Also in today’s filing, Gome said Ernst & Young completed an independent review. No deficiencies in internal controls were found, and the review discovered no “misappropriation of funds or assets,” the filing said.

Huang, Gome’s largest shareholder and ranked by Forbes magazine as China’s second-richest man in 2008, resigned from the board in January and was replaced as chairman by Chen. Huang is also known as Wong Kwong Yu.

Huang’s wife Du Juan, a former executive director, and Zhou Ya Fei, the former chief financial officer, are also under investigation. Fang Wei is acting chief financial officer.

Gome has stores in at least 160 cities in China, which the World Bank forecasts will have economic growth of 7.2 percent this year as recessions hit the U.S., Europe and Japan.

Gome competes with Suning Appliance Co. and Best Buy Co. for market share as the government subsidizes rural buyers’ home-appliance purchases.

Rival Suning is raising about 2.8 billion yuan in a private placement of as many as 200 million shares to help fund 250 new stores in China, it said in a June 20 filing to Shenzhen’s stock exchange. Suning will sell the shares for no less than 15 yuan each, the statement said.

To contact the reporters on this story: Wing-Gar Cheng in Hong Kong at wgcheng@bloomberg.net

Last Updated: June 22, 2009 09:39 EDT