Nio prices US$1 billion of 6 and 7-year convertible notes at 3.875% and 4.625%

CHINESE electric vehicle maker Nio : NIO 0%has priced US$1 billion worth of six-year and seven-year convertible senior notes on Wednesday (Sep 20) with an initial conversion premium of 30 per cent, one day after it proposed the issuance.

The US$500 million notes due Oct 15, 2029 will pay an annual interest rate of 3.875 per cent, while the US$500 million notes due Oct 15, 2030 bear a 4.625 per cent coupon.

Both notes have an initial conversion rate of 89.9685 American Depositary Shares (ADSs) per US$1,000 principal amount. It is equivalent to an initial conversion price of about US$11.12 per ADS, and represents an initial conversion premium of around 30 per cent above the ADS closing price of US$8.55 on Sep 19, 2023.

The placement agents have a 30-day option to purchase an additional US$75 million of notes for each series.

Nio may call the notes for early redemption after four years in the case of the 2029 notes, and after five years for the 2030 notes. Convertible holders may put the notes back to the company for early redemption in 2027 for the six-year notes, and in 2028 for the seven-year notes.

Nio will use part of the offering’s net proceeds to buy and cancel about US$500 million of existing convertible debt. That comprises US$256 million of Nio’s zero-coupon convertible notes due 2026 and US$244 million of the company’s 0.5 per cent convertibles due 2027. Remaining proceeds will be used to “strengthen its balance sheet position” and for general corporate purposes.

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The company expects to close the notes offering and the repurchase transactions on or about Sep 22, 2023.

Nio cautioned that the convertible holders are expected to employ a convertible arbitrage strategy. Convertible arbitrage typically involves taking short positions on the convertible’s underlying stock.

The counter fell 12.9 per cent, or US$1.28, to US$8.62 as at 9.15 am on Wednesday after the final pricing decision was set.