NYSE-listed Nio Inc NIO , which also has a secondary listing on the Singapore Exchange (SGX) and on the Hong Kong Exchanges and Clearing (HKEX), has priced US$1 billion ($1.37 billion) worth of convertible senior notes.
The notes will be issued in two tranches of US$500 million each. The first tranche will mature on Oct 15, 2029, while the second tranche will mature on Oct 15, 2030.
The notes due 2029 will bear interest at a rate of 3.875% per annum (p.a.) and are payable semiannually in arrears on April 15 and October 15 per year beginning on April 15, 2024. The notes due 2030 will be an interest rate of 4.625% p.a., also payable at the same time and beginning on the same day.
When issued, the notes, which have been offered to institutional investors, will be senior, unsecured obligations of Nio.
According to Nio, note holders may convert their notes to cash or to its American depositary shares (ADS). Each ADS represents one Class A ordinary share of the company. A combination of cash and ADSs may also be paid upon the conversion of the notes.
The initial conversion rate of the 2029 and 2030 notes are both at 89.969 ADSs per US$1,000 principal amount of the notes. This is equivalent to an initial conversion price of approximately US$11.12 per ADS and represents a conversion premium of approximately 30% above the closing price of the company’s ADSs on Sept 19, at US$8.55 per ADS.
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In its Sept 19 statement, Nio said that it may redeem its notes for cash if less than 10% of the aggregate principal amount of the relevant series of the notes originally issued remains outstanding at such time.
The latest proposed issuance should help to support Nio’s business strategy, says the team at DBS Group Research.
While the team is upbeat on Nio’s prospects in the 2HFY2023 due to an expected improvement in vehicle shipments for the period, it warns investors to expect near-term pressures in Nio’s share price.
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Nio had incurred a non-GAAP (or generally accepted accounting principles) net loss of RMB12 billion ($2.25 billion) in FY2022 and RMB9.6 billion in the 1HFY2023 which had dragged its financial position.
To this, the company “has to prepare sufficient funds to support future growth, given it is still in the early stage of development,” the team writes.
Nio’s medium-term outlook still remains intact, however, with the company’s operating cashflow expected to improve on the back of its strict capital expenditure (capex) programmes and with the anticipated improvement in volume shipments in the coming quarters.
The team adds: “Previously, Nio had issued convertible senior notes and as of end December 2022, three senior notes were still outstanding – 2024 notes with outstanding amount of US$163.7 million; 2026 notes of US$557.1 million and 2027 notes of US$750 million.”
It continues: “At end June 2023, Nio has total cash and cash equivalents of RMB31.5 billion and on July 12, 2023, the company raised US$738.5 million from CYVN Investments RSC Ltd, an investment vehicle belonging to the Abu Dhabi government. Among the total debts standing (RMB14 billion as of end June 2023; US$2 billion), some RMB4 billion of its 2026 convertible notes will be due for redemption in February 2024, hence bringing total notes redeemable in 2024 close to US$700 million”.
The team has kept its “buy” call on Nio’s US and Hong Kong listings with respective target prices of US$18 and HK$140 ($24.45).
As at 1pm, shares in SGX-listed Nio are trading US$1.11 lower or 11.2% down at US$8.79.
