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China video-streaming firm iQIYI hopes to raise US$1b in convertible bonds

Hong Kong

VIDEO-streaming firm iQIYI Inc, backed by search engine giant Baidu, is looking to raise US$1.05 billion in convertible bonds in what is likely to be one of the largest ever such sales by a US-listed Chinese company.

The deal is the latest example of the growing popularity of convertible bonds among newly listed Chinese tech companies that are searching for growth capital.

iQIYI announced the sale of its six-year convertible bonds on Tuesday, without disclosing the terms.

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A term sheet showed the bonds were being marketed with an indicative coupon range of 2 to 2.5 per cent. iQIYI is hoping to lower its borrowing costs compared to its last bond that had a shorter tenure and higher coupon.

The deal also has an over-allotment, or greenshoe, option of up to US$150 million, meaning its size could reach US$1.2 billion.

Online travel agent Ctrip.com sold a US$1.1 billion convertible bond in 2015, the largest ever by a US-listed Chinese company, according to Refinitiv data.

iQIYI was offering a conversion premium of between 27.5 and 32.5 per cent, according to the term sheet. Its shares closed at US$24.02 on Monday, almost half of their record high of US$46.23 hit in June.

It is the second time the Netflix-like streaming service is selling a convertible bond, both within a year of its US$2.4 billion Nasdaq initial public offering (IPO) in March 2018. In November, it sold a US$750 million five-year convertible bond with a coupon of 3.75 per cent.

Technology companies have increasingly turned to convertible bonds as a way of raising cheaper debt, given the companies are often unrated and have more volatile stock prices.

Bank of America Merrill Lynch, Goldman Sachs and JPMorgan are joint bookrunners for iQIYI's deal.

The deal will price after New York markets close on Tuesday. REUTERS