The bonds, which will reach maturity in 2013, were not priced at the bottom of the range, such as has been the case with many recent CBs. They were offered with a yield-to-maturity ranging between 3.75% and 4.25% and an exchange premium of between 20% and 25%. Both were priced at the mid-point û at 4% and 22.5% respectively. Investors were described as being predominantly US hedge funds.
The credit spread was assumed at Libor plus 800bp. This gave a bond floor of 70.1% and an implied volatility of 27.7%, compared with a 100-day historic volatility of 57%.
China Medical Technologies is a China-based company that develops, manufactures and sells medical equipment. It sells in-vitro diagnostic products that are used to diagnose a range of diseases, as well as therapeutic products for the treatment for benign and cancerous tumours. The company listed on Nasdaq in August 2005.
The market responded well to the companyÆs first quarter financial results which showed revenues at Rmb226.8 million ($33.1 million), up 49.7% on the same period last year; and net income at Rmb110.7 million ($16.1 million), an increase of 61.2%. These results were released on August 4 and, on the following day, the stock rose by 9.9%. At the end of last week, the shares had risen a full 12.32%. Trading on Monday this week brought another 3.32% rise, creating an advantageous setting for the offering, which kicked off after the close.
With the CB in the market, however, much of these gains were lost. On Tuesday, the share price dropped by 9.38% to $49.66. This will have had an effect on the pricing of a simultaneous placement of the companyÆs stock, offered in order to increase liquidity and make the CB more attractive to investors. The placement was said to have priced at $48, a 3.3% discount on the price at the close of Tuesday.
The company says the proceeds will be used for general corporate purposes and to make acquisitions û businesses, products, or technologies û when the opportunities arise. Until that time, the company intends to keep the money in short-term deposits.
The deal was arranged by Credit Suisse and Morgan Stanley.
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