Fortescue deal sparks Aussie equity-linked return

Hunan Valin brought an end to a three-and-a-half year drought in Australian equity-linked issuance with a $355 million bond exchangeable into the iron ore producer.

Chinese state-owned enterprise Hunan Valin Iron Steel sold $354.8 million of bonds exchangeable into shares of Australian iron ore producer Fortescue Metals Group on Tuesday, ending a three-and-a-half-year drought for equity-linked issuance in Australia.

The five year deal, puttable after three years, marks the first ever cross-border exchangeable bond in Australia and the first equity-linked transaction since Linc Energy’s $200 million convertible bond issued in March 2013.

Similar to other China-incorporated companies, Hunan Valin issued the bonds through an offshore branch, Valin Mining Investments Singapore, and provided a keepwell agreement for credit enhancement. Hunan Valin is an unlisted entity owned by the Hunan provincial...

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