Li Ning Sells $119 Million of Convertibles to TPG, Singapore

Jan. 20 (Bloomberg) --Li Ning Co. (2331) said it will sell 750 million yuan ($119 million) of convertible bonds to TPG Capital and Singapore’s government, and that 2011 sales may have fallen as much as 7 percent and profit margins narrowed.

The Chinese retailer and maker of shoes and sportswear, founded by the former Olympic gymnast of the same name, will use proceeds from the five-year, 4 percent bonds to boost its brand, open stores and fund product development, according to a Hong Kong stock exchange statement yesterday.

The company in August said first-half net income plummeted 49 percent from a year earlier to 294 million yuan as costs and competition increased. The full-year profit margin for 2011 may have shrunk as much as 8 percentage points from 2010’s 11.7 percent, Li Ning said in a separate filing yesterday.

Li Ning cited “flat” order growth and inventory repurchases from distributors, and said margins declined on its new wholesale discounting policy while its cost index may have gained as much as 8 percentage points.

For this year, Li Ning said it will cut costs “across the board,” except for marketing and research-and-development, and will seek to control procurement expense to protect profit margins. The company will clear inventory at the retail level and seek to use the London Olympics to boost its brand image.

TPG will buy 561 million yuan of the convertible bonds and Government of Singapore Investment Corp. will take 189 million yuan through is private-equity arm, Li Ning said. The bonds are convertible to shares at HK$7.74 each, a 15 percent premium to the last traded price of HK$6.72.

Li Ning’s stock was suspended Jan. 18, before the filing, and will resume trading in Hong Kong today. The shares dropped 63 percent in 2011, and have gained 8.9 percent this year, compared with an 8.2 percent increase in the benchmark Hang Seng index.

To contact the reporters on this story: Joshua Fellman in New York at jfellman@bloomberg.net; Anjali Cordeiro in Hong Kong at acordeiro2@bloomberg.net

To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net

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