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Li Ning Gains as TPG Buys Convertible Bonds: Hong Kong Mover

Li Ning Gains as TPG Buys Convertible Bonds: Hong Kong Mover
The new capital gives Li Ning funds for store openings and product development as it seeks to reverse declining sales. Photographer: Keith Bedford/Bloomberg

Li Ning Co., China’s biggest sportswear retailer, jumped the most in seven weeks in Hong Kong trading after selling 750 million yuan ($119 million) of convertible bonds to TPG Capital and Singapore’s sovereign fund.

Li Ning rose 8.5 percent, its biggest daily gain since Dec. 1, to HK$7.29 at the close of Hong Kong trading. The benchmark Hang Seng Index gained 0.8 percent.

The sales give Li Ning funds for store openings and product development as it seeks to boost sales that fell as much as 7 percent last year, when it lost 63 percent of its market value. Fort Worth, Texas-based TPG, a private equity firm that oversees about $48 billion and owns companies including Neiman Marcus Group Inc., will have the right to nominate two directors, according to the statement.

“TPG has a good reputation of helping turn around retailers,” said Forrest Chan, analyst at CCB International. “It’s positive news for the company.”

Founder and Chairman Li Ning, an Olympic gold-winning gymnast, will also cut his stake, the company said in Hong Kong stock exchange statements yesterday and today. TPG will buy part of Li’s holding amounting to 5.02 percent of the company at HK$6.60 a share, 1.8 percent below their price before the Jan.18 trading halt.

Still ‘Cautious’

“The group remains cautious of the macro-economic environment in China in 2012 and the adjustments the sporting goods industry is undergoing,” the company said in a statement.

The company issued 561 million yuan in convertible bonds to TPG and 189 million yuan to the Government of Singapore Investment Corp., it said in a Hong Kong stock exchange statement yesterday. The five-year bonds pay interest at 4 percent a year and are convertible after six months at HK$7.74 per share.

Li’s family trust, the company’s largest shareholder, will also raise HK$349.8 million selling shares at a 2 percent discount to the company’s last close of HK$6.72, the company said in a separate statement today.

Net income plummeted 49 percent in the first half from a year earlier to 294 million yuan as costs and competition increased, the company said in August.

Li Ning said it will cut costs “across the board,” except for marketing and research and development.

“The new funding will not only bring the company more room to carry out its development strategies, but will also enable the company to benefit from TPG’s and GIC’s experience in branding, retailing and products,” Li Ning said in one of its statements.

Rival sportswear companies also plunged in Hong Kong trading last year, relative to a 20 percent drop in Hong Kong’s benchmark Hang Seng index.

XTEP International Holdings Ltd. plummeted 55 percent while Anta Sports Products Ltd. lost 25 percent and 361 Degrees International Ltd. slid 45 percent.

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