Singapore’s Osim, which makes massage chairs, raised $200 million through a convertible bond on Tuesday evening — the first deal from Singapore this year and the first zero-coupon CB in this market since 2007.
Strong demand from investors allowed the company to upside the base issue size from $150 million to $170 million, though the reduction of the upsize from $50 million to $30 million means that the total potential deal size (assuming the upsize is exercised) will remain the same.
Despite the interest, Osim and sole bookrunner HSBC priced at the best terms for investors: a 25% conversion premium on the equity and a 2% yield on the bond. The structure used a conventional five-year maturity and three-year investor put.
A source close to Osim said that the company was willing to give ground on price for the sake of the quality of the book and the size of the deal, which resulted in 60% of the allocation going to specialist CB investors.
This is Osim’s first CB since 2011, having called that deal earlier this year when it was deeply in the money. The company's share price has almost tripled since 2011, so investors were in no hurry to convert the bonds. On the other hand, the strong price momentum gave the company the option of issuing a new CB at better terms.
The 2011 deal offered the same premium of 25% but paid a coupon of 2.75%. It had been in the money for more than a year before its first call date in July this year.
Osim said that it was raising money to finance expansion in Asia and beyond, and for potential strategic acquisitions.
The company’s products are well-known to consumers in Asia due to their ubiquitous presence in shopping malls across the region — and because their demonstrator chairs provide a welcome respite from the rigours of shopping. It is rare to see an empty one.
This familiarity obviously helps the company when it comes to raising capital.
The CB was marketed at a credit spread of 225bp and chairman Ron Sim provided stock borrow of up to 20 million shares.
The deal comes with dividend protection on a per-share basis ― the conversion price will be adjusted for dividends above S$0.06 in 2014, S$0.07 in 2015 and S$0.08 thereafter.
At the final terms, this resulted in a bond floor of about 96% and an implied volatility of 21% — a small discount to its historic volatility of around 24%, which is considerably lower than in 2011 due to the stock’s one-way direction since then.
As well as massage chairs, Osim’s full range of products includes foot massagers, neck-and-shoulder massagers, head massagers, fitness equipment, diagnostic equipment, vitamins and supplements, and luxury tea.
