CTS enhances liquidity with placement

China Travel Services (CTS) has completed a secondary share placement to maintain its current ownership level in China Travel International Investment, following the exercise of a convertible from subsidiary to parent.

Full conversion of a HK$600 million ($77 million) convertible bond issued by the subsidiary in March has prompted a subsequent share placement led by BNP Paribas Peregrine on Tuesday.

The original convertible deal comprised an 18 month offering, carrying a coupon of 2% and a 5.7% conversion premium to China Travel International Investment's closing share price of HK$1.07 on March 21. The 530 million share deal was converted by the parent at HK$1.13 per share.

The placement, which involved the sale of 200 million secondary shares to institutional investors, was priced at HK$1.6435, a 5% discount to Monday's close, but a 4% premium to a 10 day average. As a result of the placement, the parent's shareholding in its subsidiary dropped from 60.2% to 54%, but with full conversion of the bond, jumps back up to 60.5%.

Books for the HK$328.7 million ($42 million) deal were closed within five hours of launch and bankers report a 90%/10% split between investors in Asia and Europe. In addition, there was also a one for five bonus warrants issue as the company paid out a 2% special dividend and 1% final dividend within a day of the transaction's close.

Following the placement, the stock closed up at HK$1.72 on Wednesday, before falling to HK$1.62 yesterday (Thursday) after the shares went ex-dividend and ex-warrants.

China Travel International issued the convertible bond in March as part of a financing package to acquire an overseas travel agency business and Macau hotel from its parent. It has also previously issued a second three year convertible bond, which the parent will hold until maturity.

This was issued back in December 1998 and has a much higher coupon of 6% and a conversion price of HK$1.10.

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