China Merchants Holdings International Co. (144), a port operator, said it plans to raise as much as HK$15.4 billion ($2 billion) by issuing mandatory convertible securities to repay debt and fund constructions.
The company will sell between 505.4 million to 509.8 million units of mandatory convertible securities to shareholders, it said in a statement to the Hong Kong stock exchange today. The company will issue one security for every five shares held by qualifying shareholders, it said. All shares will converted into new ordinary shares at the conversion price of HK$30.26 in the third year from the date of issuance, it said.
China Merchants Holdings said it plans to use 55 percent of the net proceeds for debt repayment, 40 percent to fund ports and related construction, and 5 percent for general working capital. After completion of the sales and full conversion of the securities, the number of total ordinary shares outstanding will increase to 3.03 billion from 2.53 billion, it said.
Holding company China Merchants Group Ltd. and its associates have an interest of about 55 percent in China Merchants Holdings as of today, according to the statement. China Merchants Holdings also today reported full-year profit of HK$4.21 billion, an increase of 10 percent from a year earlier. The results beat the average estimate of 12 analysts of HK$4.06 billion.
Standard & Poor’s placed China Merchants Holdings on creditwatch with positive implications, citing improved leverage on the proposed issue of mandatory convertible securities.
The company’s “ratios of cash flow to leverage are likely to significantly improve in 2014 as the company deleverages and starts to receive contributions from its overseas acquisitions,” Standard & Poor’s said in a statement today.
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