Ping An Seeks to Raise US$3.5 Billion via Convertible Bond Sale

China’s leading insurance company Ping An is seeking to raise US$3.5 billion through a convertible bond sale, following the footsteps of other Chinese companies like JD.com, Alibaba, and Trip.com in accessing more affordable funding options amidst soaring interest rates. The bonds, set to mature in 2029, come with a yearly coupon rate of 0.875 per cent and an initial conversion price of HK$43.71 per share on the maturity date, offering a 21.3 per cent premium over the closing price on Monday.

If fully converted, the bonds could be turned into approximately 625 million new shares, accounting for around 8.39 per cent of existing H-shares and 3.43 per cent of total outstanding shares. The net proceeds from the bond sale, estimated at US$3.45 billion after deducting fees and expenses, will be utilized to enhance Ping An’s core business, fortify its capital structure, support new strategic initiatives in healthcare and elderly care sectors, and for general corporate purposes. Highlighting the benefits of convertible bonds, the company stated that it offers an opportunity to optimize capital structure and diversify funding sources.

Despite the positive intentions behind the bond sale, Ping An’s stock witnessed a 5.1 per cent drop to HK$34.20, nearing a two-month low, as investors expressed concerns over potential share dilution and convertible arbitrage strategies. Nevertheless, the move signifies Ping An’s strategic approach to adapt to the evolving market conditions and further its expansion plans, aligning with the broader trends observed in the Chinese financial landscape.