KKR to buy convertible bonds in Chinese water treatment firm

The bonds come with a coupon of 2.5% and a tenure of five years, after which they could be converted into equity at a conversion price of S$0.450 per share. This represents a 37.3% premium on UEL's average close price for trades done in the last 30 trading days. It is also a 29% premium on the stock's Friday close.

Stirling Coleman Capital is responsible for arranging the transaction and Credit Suisse (Singapore) is financial advisor to KKR.

UEL is provides engineering services using membrane technology to municipal and industrial waste water treatment projects, and also operates a portfolio of waste water treatment plants across China. With KKR's support, it is looking to expand in a market where, according to World Bank statistics, per capital water resources are less than one-third of the world's average.

According to the proposed subscription agreement, at least 90% of the proceeds from the bond issue will be put towards transfer-operate-transfer, build-operate-transfer and build, own and operate projects. The remainder will be used for working capital requirements.

"KKR is delighted to have the opportunity to invest in UEL," said David Liu, CEO of KKR Greater China. "We are extremely impressed with the company's strong track record, outstanding management team and deep industry knowledge. We look forward to fully utilizing our global network and industry expertise to support UEL in its future growth. Equally, we look forward to working together with UEL on its environmental initiatives in China."

The investment is being made through an indirect wholly owned subsidiary of KKR Asian Fund LP. The private equity firm launched its China Growth Fund last year with a target of $800 million, and reportedly reached the hard cap of $1 billion.

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• Topics
• Greater China
• Cleantech
• PIPEs
• KKR