Chinese travel agent Ctrip.com International launched a dual tranche convertible bond issue on Thursday evening under the sole lead of JP Morgan. The $1 billion deal, with a $150 million upsize option, is scheduled to price mid-morning Asian time on Friday.
The first tranche has a five-year maturity and a three-year put option, according to a source close to the deal. These notes — due in 2020 — are being offered on a coupon range of 0.75% and 1.25%, and a conversation premium range of 42.5% to 47.5%.
The second note has a 10-year maturity with a put option at the end of five years, and is being offered on a coupon range of 1.50% to 2%. These notes — due in 2025 — are also being offered at the same 42.5% to 47.5% conversation premium.
The bonds will be convertible into Ctrip's American depository receipts, each representing 0.25 of an ordinary share of Ctrip, according to a company statement.
Ctrip will not have the right to redeem the notes prior to maturity. Holders of the notes can require the company to repurchase all or part of the 2020 notes on July 1, 2018, and all or part of the 2025 notes on July 1, 2020.
In a statement the company said the majority of the proceeds would be used for general corporate purposes and specifically a concurrent repurchase of its ADRs.
Nasdaq-listed Ctrip's shares have jumped 65.7% in the year to Wednesday's $75.71 close. The company is trading at 89.35 times its 2015 earnings.
Ctrip was last in the convertible market nearly two years ago in October 2013 when it raised $800 million. This deal was increased from $500 million and priced at the tight end of its indicative range, with a 1.25% coupon and a 42.5% conversion premium.
Strong demand allowed Ctrip to exercise the greenshoe option and boost the deal size to $800 million.
At Thursday's close in Asia, the bond was trading on a bid/offer price of 116.25%/117%.
Qunar declined to pursue the deal, although in a recent earnings statement it said that it “remains open to engaging in further discussions with Ctrip as well as with other strategic players."
Qunar raised over $800 million from a concurrent follow-on and convertible bond sale on June 8. The convertible bond attracted US private equity firm Silver Lake and investment manager Hillhouse Capital.
Silver Lake pledged to purchase $330 million worth of convertible bonds, while Hillhouse bought the remaining $170 million.
In a recent research report JP Morgan said it was turning increasingly positive on Ctrip's long-term growth prospects and has a target price of $87. "We believe its aggressive investment in mobile, new initiatives (baby tiger projects) and open platform over the past two to three years (have) all started to generate meaningful operational and financial returns," it concluded.
The bank says its expects faster and more sustainable revenue growth, estimating a compound annual growth rate of 40% during the 2014 to 2017 financial years compared to 28% from 2011 to 2014.