Malaysian IC testing and packaging company Unisem Berhad priced a debut $80 million convertible on Friday via lead managers Credit Suisse First Boston and ING. The deal size was relatively small, but the impact on the company's share capital is large given that it represents 25% of the enlarged share capital and 65 days trading. In addition, Unisem has also received permission to issue a further $50 million before February 2005.
Terms on the deal comprise an issue price of par, a semi-annual coupon of 2%, a three-year put at 107.12% and a yield-to-put of 4.25%. Redemption is at 112.39%. The conversion premium was fixed at 29.6% to the stock's M$10.80 close. There is no call option, but a $20 million greenshoe.
Underlying assumptions include a bond floor of 94.5%, implied volatility of roughly 21% and theoretical value of roughly 104.5%. This is based on a credit spread of 325bp, 6% borrow cost, 0.93% dividend yield and 40% volatility assumption.
Books are said to have closed eight times oversubscribed, with investors capped at $10 million. A total of 120 accounts participated, with a split that saw 30% placed into the UK, 30% with offshore US investors, 25% to Hong Kong and 15% to Europe.
Year-to-date the stock is down 2.70% although it has returned 73.68% on a 12 month basis.
Terms are far wider than would be expected for even the most lowly rated Taiwan CB's. However, Unisem is a company with no credit history in a country with far less underlying liquidity. Added to this, the large size of the deal relative to the company's size would have weighed on the terms it could have achieved.
Nevertheless observers say investors were happy to take the deal on an outright basis, viewing it as a good proxy for an upswing in the tech sector and a currency play based on the Ringgit/Dollar peg.