China’s top insurer Ping An seeks to raise US$3.5 billion via convertible bond sale

The bonds, due in 2029, have a coupon rate of 0.875 per cent per year, and the initial conversion price is HK$43.71 per share on the maturity date, according to a filing on Tuesday. That represents a 21.3 per cent premium over the closing price of HK$36.05 on Monday, the company said.

With full conversion, the bonds would be convertible into around 625 million new shares, which represents about 8.39 per cent of existing H-shares and 3.43 per cent of total shares outstanding, according to the filing.

The net proceeds from the bonds after deduction of issue fees and expenses are estimated to be around US$3.45 billion. Morgan Stanley and JPMorgan are joint global coordinators for the deal.

The company’s stock dropped 5.1 per cent to HK$34.20, near a two-month low, as investors reacted to the potential share dilution and convertible arbitrage strategies.

The issue of the bonds represents “an opportunity to optimise the capital structure and diversify funding sources”, the company said.

The group intends to use the proceeds to further develop its core business, strengthen its capital position, support new strategic initiatives in the healthcare and elderly care sectors, and for general corporate purposes, the filing said.

A convertible bond is a debt-like instrument that pays interest and includes an upside call option to convert into the underlying stock. It can help issuers reduce financing costs compared with traditional bond sales when interest rates are elevated, while also providing investors with equity upside potential and downside protection.

Mainland Chinese tourists last year spent HK$59 billion (US$7.6 billion) on life and medical insurance policies in Hong Kong, higher than the HK$51 billion recorded in 2019, according to Insurance Authority figures.