Morning Commentary: ZTO Express convertible notes offering eyed

By Abigail W. Adams

Portland, Me., Aug. 24 – The convertibles primary market continued to churn out new offerings in a surprise burst of late-summer activity.

ZTO Express plans to price $870 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 1% to 1.5% and an initial conversion premium of 30% to 35%.

Underwriters were marketing the deal with assumptions of a 230 basis points spread and a 35% vol., according to a market source.

Using those assumptions, the deal looked 4.4 points cheap at the midpoint of talk.

Some sources felt the credit spread for the Shanghai-based delivery service was tight and pegged it at 350 bps.

There was debate about the vol. with some sources pegging it as high as 40% and others as low as 30%.

The 10-day vol. for the company’s ADSs is 25% but the 100-day vol. is 45%.

While ZTO appears to have plenty of cash on the balance sheet, there is a lot of distrust in the investor community about China-based companies and their accounting practices, sources said.

Delisting concerns and geopolitical tensions have also made the ADR space suspect.

However, the deal was heard to be wall-crossed and already covered at the time of launch.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.