China’s NIO sells US$1.3 billion worth of convertible notes as electric car maker’s ADS hits all-time high in New York

Alison Tudor-Ackroyd
·3-min read

Chinese electric car maker NIO has sold US$1.3 billion worth of convertible senior notes that can be swapped for the smart electric vehicle maker’s surging American depositary shares.

NIO’s ADSs hit an all-time closing high of US$62.70 a piece on Monday on the New York Stock Exchange, up 6.42 per cent on the day.

If the Tesla challenger issues a greenshoe tranche, an over allotment of shares, then the offering could rise to US$1.5 billion.

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NIO launched a mass production electric car on Saturday with what could be the world’s farthest driving range, as it ups the ante with Tesla for customers in the largest market for new-energy vehicles on the planet. Its new electric luxury sedan could go as far as 1,000km on a single charge, using a 150 kWh battery, the carmaker said.

William Li Bin, chief executive of NIO, on stage during the launch of the carmaker's ET7 sports-utility vehicle in the Sichuan provincial capital of Chengdu on January 9, 2021. Photo: Daniel Ren
William Li Bin, chief executive of NIO, on stage during the launch of the carmaker's ET7 sports-utility vehicle in the Sichuan provincial capital of Chengdu on January 9, 2021. Photo: Daniel Ren

A convertible note is a fixed-income security that yields interest payments, but can be converted into equity shares.

NIO’s convertible notes are divided into two tranches, one due in 2026 and the other a year later.

The US$650 million batch, that matures in five years, is callable by the issuer after three of those years. NIO is marketing the notes to investors within a range of a zero to 0.50 per cent coupon and a conversion premium of 45 per cent to 50 per cent.

The second US$650 million tranche matures in six years and is callable by the issuer after four. The marketing range is a 0.50 per cent to 1 per cent yield and a conversion premium of 45 per cent to 50 per cent.

NIO, founded in 2014, is likely to price the offering on Tuesday after the US stock market closes.

The joint bookrunners on the offering are Credit Sussie, Goldman Sachs, Morgan Stanley and CICC.

Competition is heating up in China’s electric vehicle market as almost 200 carmakers and internet start-ups jostle for supremacy in an industry where one in every five cars will be powered by a non-fossil fuel source by 2025.

China, the world’s largest market for all vehicles since 2009, also has the highest number of electric cars on the nation’s roads.

NIO’s third model since its establishment six years ago comes as Xpeng Motors is poised to roll out a lidar-based autonomous driving system – something that Tesla’s chief executive Elon Musk derided was too expensive – while internet search giant Baidu prepares to partner China’s largest carmaker, Geely Automobile, to make electric vehicles.

The carmakers raised billions of dollars in capital last year from investors to finance their research and development.

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