Linklaters leads multiple Asia Pacific landmark convertible bonds

Linklaters advised the underwriters on several recent landmark convertible bonds transactions in the Asia Pacific region, underscoring a significant resurgence in equity-linked activity. These included,

• the US$925m convertible bonds issued by Xero Investments Limited and the A$300m convertible bonds issued by New Hope Corporation, both out of Australia, and
• the US$2bn convertible bonds issued by Zijin Mining (combined with a HK$3.9bn concurrent equity offering) and the US$3.5bn convertible bonds issued by Ping An Insurance, both out of the PRC.

The Ping An Insurance convertible bond was reported as the largest ever Regulation S only convertible bond, the largest convertible bond in the insurance sector and the first offshore convertible bond by a Chinese insurer.

The Xero Investments and New Hope convertible bonds utilised derivative overlays to raise the effective conversion price of the bonds through private derivative transactions – a complex transaction structure more commonly seen in the US domestic equity-linked market for high-growth corporates. Linklaters have advised on all five such transactions in the Asia Pacific region. 

While both Australian transactions utilise “derivative overlays” to increase the effective conversion price and offset the potential dilution, the techniques used are varied with New Hope using a unitary capped call and Xero structured as a bifurcated call spread comprising the purchase of lower strike call options and the sale of upper strike call options. The continuing development of these kinds of derivative overlays adds additional flexibility to Asia Pacific issuers’ financing toolkit, whether new economy issuers with strong growth narratives or seasoned issuers looking to tap the equity-linked market.

The Zijin Mining and Ping An Insurance transactions both involved concurrent delta placements to facilitate hedging and reinforces a broader theme of Chinese firms turning to convertible bonds to raise funds – with almost US$13bn raised by Chinese companies in May and June 2024 alone via equity linked issuances.

The lead partners on these transactions were Linklaters’ Singapore Managing Partner Jonathan Horan, capital markets partners Stephen Song, Taiki Ki, Victor Wan and corporate partner Donnelly Chan.

These complex transactions highlight the firm’s capabilities in navigating capital market challenges and its commitment to providing comprehensive legal solutions that align with clients' strategic objectives and financing needs.