Chow Tai Fook Jewellery Group Ltd, led by Henry Cheng, is launching one of Hong Kong’s largest convertible bond issuances of the year, targeting HK$7.85 billion (approximately US$1 billion). The fundraising initiative arrives amid heightened scrutiny of another arm of the Cheng family’s business empire, New World Development Co, which is contending with a significant liquidity crisis.
The proposed convertible bonds, denominated in Hong Kong dollars, are set to mature around the end of June 2030. According to transaction terms reviewed by Bloomberg News, the bonds will offer a coupon ranging from zero to 0.5%, payable on a semi-annual basis. The proceeds are earmarked for Chow Tai Fook’s jewellery operations and general working capital requirements, with no linkage to New World Development’s financial position.
New World, one of Hong Kong’s most leveraged major developers, is currently managing liabilities exceeding HK$200 billion. In contrast, Chow Tai Fook has reported stronger-than-expected earnings and has been actively repositioning its brand identity towards premium market segments, aligning more closely with luxury names such as Tiffany & Co and Cartier, and moving away from its traditional image as a gold retailer.
UBS Group AG, acting as the sole bookrunner, plans to execute a share placement to support investor hedging activities associated with the bond offering. As part of this arrangement, Chow Tai Fook intends to repurchase up to HK$1.57 billion worth of its own shares.
The convertible bonds feature a conversion premium of between 35% and 45% over the clearing price established during the delta placement. Investors may convert the bonds from 30 June 2028 onwards. Additionally, a 90-day lock-up period has been imposed on the company.
Prior to the announcement, Chow Tai Fook shares gained 6% to close at HK$13.72 on the Hong Kong Stock Exchange.
The broader Asian market has experienced a surge in convertible bond activity this year. Just last week, Singapore-based Grab Holdings Ltd raised US$1.5 billion through a convertible bond deal, exceeding its initial fundraising target. Earlier in the month, Ping An Insurance (Group) Co of China Ltd completed a HK$11.8 billion convertible bond issuance.
Both Chow Tai Fook and Ping An opted to denominate their bonds in Hong Kong dollars, even as the local currency approaches the weaker end of its official trading band against the US dollar. The move follows a decline in local interest rates to their lowest point in three years, significantly widening the rate gap with their US counterparts.
-Bloomberg
