BYD reduces debt interest in bond sale
BYD Co. sold bonds in Shenzhen at a third of the cost of debt in Hong Kong as mainland investors bank on government support for new energy to buoy its slumping profits.
The manufacturer sold 3 billion yuan ($472 million) of five-year securities priced to yield 5.25 percent, according to a company statement.
That compares with the 14.3 percent yield on its Dim Sum bonds due in 2014. In the United States, automakers pay an average 2.64 percent on their debt, according to Bank of America Merrill Lynch.
The company declined to comment on the bond sale.
BYD has been struggling to stabilize its declining market share. In the first three months, the company's vehicle sales fell 8 percent from a year earlier to 108,755 vehicles.
This year, BYD will introduce its second-generation F3 model, which was China's best-selling sedan in 2009 and 2010. Sales of the F3 declined after General Motors and Honda Motor Co. introduced new models.
Because of its stagnant sales, BYD's profits in the first six months of 2012 are expected to decline as much as much as 95 percent.
BYD's mainland bond sale comes as borrowing costs fall for businesses after the People's Bank of China cut the key lending and deposit rates this month, the first reduction since 2008.
"BYD has been under pressure on the capital front and money raised from the bond sale surely helps them," said Harry Chen, an analyst with Guotai Junan Securities Co. in Shenzhen. "Blood transfusionlike bond issuance won't be enough. The company needs to improve its profitability."
That compares with the 14.3 percent yield on its Dim Sum bonds due in 2014. In the United States, automakers pay an average 2.64 percent on their debt, according to Bank of America Merrill Lynch.
The company declined to comment on the bond sale.
BYD has been struggling to stabilize its declining market share. In the first three months, the company's vehicle sales fell 8 percent from a year earlier to 108,755 vehicles.
This year, BYD will introduce its second-generation F3 model, which was China's best-selling sedan in 2009 and 2010. Sales of the F3 declined after General Motors and Honda Motor Co. introduced new models.
Because of its stagnant sales, BYD's profits in the first six months of 2012 are expected to decline as much as much as 95 percent.
BYD's mainland bond sale comes as borrowing costs fall for businesses after the People's Bank of China cut the key lending and deposit rates this month, the first reduction since 2008.
"BYD has been under pressure on the capital front and money raised from the bond sale surely helps them," said Harry Chen, an analyst with Guotai Junan Securities Co. in Shenzhen. "Blood transfusionlike bond issuance won't be enough. The company needs to improve its profitability."
