Canadian Solar in $230m-plus CB and share sale

Suzhou-based solar company capitalises on its spectacular share price performance to raise up to $265 million from combined equity and convertible bond offering.

Canadian Solar, one of the world’s biggest solar power companies, returned to capital markets on Tuesday with a combined equity and convertible bond offering that could raise up to $265 million, after announcing a return to profit in 2013.

The company — which is listed in the US, incorporated in Canada and manufactures in China (where its management is also based) — has been one of the biggest beneficiaries of investors’ renewed interest in the solar industry over the past year.

Canadian Solar's shares have surged by more than 600% in the last 12 months, having traded at less than $5 a share in early 2013. As a result the company was able to sell $100 million of common stock at $36 a share in New York.

Canadian Solar also achieved an unusual structure on its successful sale of convertible bonds, which featured an issuer-friendly mix of US and Asian practises — a five-year tenor with no investor put (three-year puts are standard for Asian borrowers) and an issuer call (common in Asia but rare in the US).

This gave the company greater funding certainty over five years and a higher likelihood of converting the bond, which bank sources said were its main goals.

A detailed breakdown of the order books was not available due to strict rules around US equity offerings but the size of the CB was increased to $130 million from $100 million, with a $20 million greenshoe, suggesting demand was strong.

The CB launched on Tuesday at 7pm local time in Hong Kong and was marketed with a coupon range of 4.25% to 4.75%, pricing at the lower end of that range after the sales effort shifted to New York. This was offset by a conversion premium that was set at 25%, the investor-friendly end of the 25%-to-30% range.

Other aggressive terms included an implied volatility of 32% and a fair value of 103.5. Bank sources said that orders came from a mix of outright investors and hedge funds, with decent Asian demand.

The straight equity offering, which sold at a 7.5% discount to the market price, allowed the company to tap a different investor base and to increase the amount of stock-borrow available for investors who wanted to hedge the CB.

The global solar panel industry continues to suffer from excessive supply, which has forced down unit prices and made it difficult for companies to pay off mounting debts. But Canadian Solar has recently bucked that trend by diversifying into the higher-margin business of building solar power plants, such as its Mississippi Mills project in Ontario, Canada, a 10 megawatt plant sold to TransCanada for C$61 million ($55 million) in December.

Canadian Solar made a preliminary earnings announcement on the day of its offering, saying that it expects to report a profitable fourth quarter and full-year — its first since 2010.

Few of its rivals have yet to return to the capital markets, despite high debts across the industry. Companies such as Yingli, Sunpower and LDK have not tapped investors for at least two years, though Jinko Solar has raised $350 million from two offerings in the past six months, most recently in January.

Canadian Solar’s founder and chief executive, Shawn Qu, is also its biggest shareholder, currently owning a 29.6% stake.

Canadian Solar makes high-efficiency solar cells, solar modules, solar power systems and off-grid solutions. With manufacturing facilities in Canada and China, it has a total production capacity of 2.4 gigawatts.

Credit Suisse and JP Morgan were active bookrunners, while Nomura was said to have taken a passive role.

¬ Haymarket Media Limited. All rights reserved.
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