TPK Holding US$466.2 million follow-on and convertible bond offering
Bookrunners: J.P. Morgan, Nomura
The capital markets of Taiwan did not have one of their more notable years. Share volatility crimped too much equity issuance, and the country’s forte of convertible bond volumes suffered too as the markets proved too volatile for many would-be issuers to gain much traction.
Nevertheless, TPK Holding demonstrated that with some determination deals of size could still get done. The touch screen manufacturer, which supplies screens for Apple’s iPhones and iPads, raised a total of US$466.2 million. This total was split into a zero coupon convertible bond issue that raised US$200 million, with the rest issued through a concurrent depositary share offer to help install some price tension into the deal.
The five year non-put three bonds were priced at par with a par redemption. Further, the bonds were priced with a conversion premium of 15% from its discussed 15%-25% range, offering an unusually low bond floor of 90.9. Yet despite the tight pricing 60 investors bought the bonds, from Europe, the US and Asia.
Market conditions helped TPK enjoy such tight pricing terms, with a lack of supply leaving investors hungry for Asian convertible bonds.
At the same time TPK sold 17.6 million of depositary shares, each worth an ordinary share, at the bottom end of a mooted US$13.4-US$13.82 share range, following a fairly muted response from investors. The shares ended up being offered at a 3.6% discount to the company’s last stock price close of TWD409.5.
The reasoning for the deal made sense. In its filings for the share and convertible bond issues TPK said it would use the deal proceeds to expand the capacity of its subsidiaries and purchase equipment and raw materials abroad. TPK wants to expand its services to non-Apple vendors to improve its diversification; a step that analysts think is wise and could help its revenues going forward.
While TPK’s deal was the standout from Taiwan in 2012, another notable transaction was China Network Systems’ (CNS) TWD40.2 billion (US$1.34 billion) syndicated loan. The cable television provider’s leveraged facility was conducted on behalf of CNS owner MBK Partners to refinance the debt it had originally put into place to buy CNS. Organising the refinancing was complicated by the fact that Want Want China Times Media Group wanted to buy CNS from MBK, but was waiting for the green light to do so from the National Communications Commission, Taiwan’s national media regulator.
The NCC’s conditional approval was forthcoming shortly before the loan was finalised, giving Want Want control over a large sway of Taiwan’s media sector—something that some locals have been increasingly uncomfortable with, given the pro-China leanings of Want Want’s chairman, Tsai Eng-ming.