TPG, Warburg Pincus subscribe to Uxin convertible note

Both private equity firms are among Uxin’s existing shareholders, having contributed to the approximately $1 billion in private funding the company received in the four years before its IPO. Uxin said several investors subscribed to the notes, although Chinese online classifieds platform 58.com is the only other one to be named.

The notes, which have a five-year tenor and bear an interest rate of 3.75% per annum, can be converted into equity 180 days after issuance. The conversion price is $3.09 per share. Uxin’s shares closed at $2.46 on May 28, up 5.6%. The company listed at $9.00, below its indicative range, and the stock has been on a general slide ever since, apart from a spike in late December.

Uxin was established in 2011 by a group of former executives at auto listings provider Bitauto. The company claims to be the largest used car e-commerce platform in China, its online presence supported by an offline network of more than 1,300 service centers nationwide. The business has two main strands: a B2B auction platform and a consumer-facing platform that provides recommendations, financing, title transfer, delivery, and other services.

Approximately 560,000 cars were listed on the B2B platform as of December 2018 and gross merchandise value (GMV) for the year was RMB15.3 billion ($2.2 billion). On the B2C side, nearly 500,000 transactions were facilitated last year, generating GMV of RMB39.8 billion. Uxin receives commissions on transactions and for facilitating auto loans for B2C customers.

Total revenue came to RMB3.32 billion in 2018, up from RMB1.95 billion the previous year. Over the same period, the company’s net loss narrowed from RMB2.75 billion to RMB1.54 billion, but that was mainly due to fluctuations in the share redemptions. Marketing expenses – specifically branding and customer acquisition costs – still increased from RMB2.2 billion to RMB2.69 billion.

“We are very pleased to welcome 58.com as our new strategic investor, and receive continued support from our pre-IPO investors who value Uxin’s long-term strategy and growth. We will also form an in-depth strategic partnership with 58.com, particularly in the areas of traffic and inventory acquisition, used-car inspections, big data analysis and SaaS,” Kun Dai, Uxin’s founder and CEO, said in a statement.

Michael Yao, the chairman and CEO of 58.com, noted that there is enormous growth potential in China’s used car market, with transaction volume set to overtake that of new cars in the coming years. He also highlighted the strong momentum Uxin has seen in cross-regional transactions, where buyer and seller are in different parts of China and transactions are completed with no on-site inspection by the buyer.

Warburg Pincus first backed Uxin in 2014, leading a $260 million round with Tiger Global Management. It re-upped in subsequent rounds and is currently the second-largest external shareholder – after Jeneration Capital – with a 12.7% stake. TPG Growth participated in a $500 million round in 2017; the IPO prospectus said it contributed $60 million. The firm’s equity interest is below 5%.

Uxin also completed a private placement of convertible notes worth $175 million at the time of its IPO. The investors were affiliates of CITIC Bank and Industrial & Commercial Bank of China (ICBC), both of which entered into strategic cooperation agreements with the company under which they would provide auto loan products tailored for its customers.

Numerous Chinese technology companies have turned to convertible bond sales in the months following their IPOs. These transactions enable them to raise capital at a lower cost than traditional bonds because investors usually accept a lower coupon in return for the equity conversion right.

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• Topics
• PIPEs
• Technology
• Greater China
• China
• TMT
• Warburg Pincus Asia
• TPG Capital
• automobiles