Dekon plans $100 million zero-coupon convertible bond issue

Hog farmer Dekon Food and Agriculture Group (2419.HK) said on Sunday it plans to issue $100 million in zero-coupon convertible bonds due in August 2027. The initial conversion price is HK$54.08 per share, representing a 5% premium to the company’s July 24 closing price of HK$51.50. The bonds are expected to be listed on the Vienna MTF.

A full conversion of the bonds will require Dekon to issue about 14.5 million new Hong Kong-listed shares, equal to about 3.73% of its current share capital and 3.59% of its enlarged share capital. The company expects to raise net proceeds of about $99.7 million.

Dekon will use 40% of the proceeds to repay outstanding bank borrowings, 30% to purchase animal feed, and the remaining 30% for feed ingredients, veterinary medicines, vaccines, disinfectants and other production inputs. The company said the bond issue would help meet repayment needs for borrowings due within one year and provide working capital for its livestock and poultry farming operations.

Dekon previously warned that it expects to post a net loss of as much as 1.4 billion yuan ($207 million) for the first half of this year due to an oversupply of hogs in China, reversing a profit of 1.23 billion yuan a year earlier.

The company’s shares opened lower on Monday before recovering their losses, and were unchanged at HK$51.50 by the midday break.

By Lee Shih Ta

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