NYSE-listed Sea Group on Wednesday announced the pricing of its $1-billion convertible note offering due 2025 at 2.375 per cent.
Sea Group, the parent company of e-commerce player Shopee and digital entertainment unit Garena, will use part of the proceeds to repay its 2023 convertible notes priced at 2.25 per cent, it said in a statement.
Convertible notes or bonds grant holders of the security the right to exchange them for equity above a pre-set price, offering the firm scope to reduce coupon payments on debt. Bond yields move inversely to the price.
Sea said it plans to use the net proceeds of the 2025 notes for capped call transactions to reduce future dilution and to repurchase part of the 2023 convertible bond offering.
The company will also use some of the proceeds for business expansion and other general corporate purposes, including potential strategic investments and acquisitions.
In a deal with certain holders of the 2023 notes, Sea agreed to exchange $150 million of the notes’ principal for around $50 million in cash and around 6.9 million American depositary shares (ADS). The company had raised $575 million through the sale of the notes due 2023 in 2018.
The ADS closed at $72.40 on the New York Stock Exchange Wednesday, suggesting a price tag of around $500 million for the 6.9 million ADS.
The 2025 notes will be convertible to the company’s common stock, cash or a combination of cash and stock, at the company’s discretion, with the initial conversion rate set at 11.0549 ADS per $1,000 in principal, or around $90.46 per ADS.
In November, Sea priced $1 billion of convertible senior notes due 2024 at 1 per cent, with an initial conversion rate of 19.9475 ADS per $1,000 in principal amount, equivalent to around $50.13 per ADS. At the time, the ADS were trading at around $35.18.
Sea intends to grant to the initial purchaser a 13-day option to purchase up to an additional $150 million of the 2025 notes, according to its announcement.
COVID-19 drives growth for Sea businesses in Q1
The tech company’s net losses narrowed to $280.8 million in the first quarter of this year, from $689.6 million in the year-ago period, Sea said in a statement Monday.
Total adjusted revenue rose 57.9 per cent on-year to $913.9 million in the quarter, while adjusted EBITDA – or earnings before interest, tax, depreciation and amortization — losses more than doubled to $69.9 million, the statement said.
Sea’s gaming arm Garena —the only profitable business under the group — continued to buoy group earnings, but other units saw an uptake in business as the COVID-19 outbreak drove more users online.
The consumer shift to digital channels was reflected in the rise in quarterly active users for Garena, gross merchandise value (GMV) for Shopee and total payment volumes recorded by Shopee’s mobile wallet.
“The coronavirus crisis is driving a step-change in the growth of the digital economy globally, materially accelerating a shift to online lifestyles that is broad, deep, and, in our view, irreversible. We believe that Sea, as a market leader in some of the key sectors of the digital economy, is gaining and will continue to gain a disproportionate share of the resulting growth in our markets,” Sea chairman and group CEO Forrest Li said in the statement.