TPG-backed Li Ning to issue $241m in convertible securities

According to a regulatory filing, qualifying shareholders will be offered one convertible security for every two existing shares. The convertible securities are priced at HK$3.50 apiece, representing a 44% discount to the stock's last closing price. The proceeds will be used to execute its brand revival plan.

Viva China - a shareholder as well as a company partially held by Li Ning's founder - will underwrite 60% of the securities. TPG will underwrite the remainder. TPG, Viva China and GIC have all agreed to subscribe to the issue.

Last February, Li Ning sold RMB750 million ($119 million) in convertible bonds to TPG and GIC at a conversion price of HK$7.74 per share. If fully converted, TPG would own 12% of the company, while GIC's holding rose to 8%, up from 6% prior to the deal. Following the latest dilution, the  conversion price will be adjusted to HK$4.50 per share, which represents a 3.64% discount to the 90-day average trading price.

In December, the Chinese sportswear brand predicted a substantial net loss for 2012 based on its preliminary review for the 11 months ended November.

The loss is expected to be primarily attributable to one-time costs relating to the implementation a $288 million transformation plan. It includes a range of initiatives focusing on support for channel partners' inventory clearance, inventory buy-back, sales network rationalization as well as customized programs to restructure the accounts receivable from individual participants.

Li Ning, which operates around 7,000 outlets across China, has struggled in recent years after a failed attempt to reposition the brand and challenge the likes of Nike and Adidas. The company has since lost market share to local rivals in second- and third-tier markets as well as trailing Nike and Adidas in top-tier locations.

"Li Ning Company and TPG are pleased with the development and the progress made to date on the implementation of the transformation plan," said Jin-Goon Kim, partner at TPG. "TPG is further strengthening its commitment to the group by committing to subscribing to the open offer and underwriting a significant portion of the open offer to increase its investment in the Group."

Kim, who previously turned around Chinese women's shoe retailer Daphne, was appointed executive vice chairman of Li Ning in July. The move came as CEO Zhiyong Zhang stepped down and was replaced by founder Li on an interim basis. In October, CFO Yik-Kay Chong also left the company.

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• Topics
• Greater China
• PIPEs
• Consumer
• China
• TPG Capital
• Consumer
• GIC Private