Baidu's iQiyi Video Site Plans Convertible Bond Sale
(Bloomberg) -- iQiyi Inc. is seeking to raise $500 million in a convertible bond sale, as the loss-making Chinese streaming site aims to replenish its coffers amid fierce competition in the online video industry.
The company, backed by Chinese search giant Baidu Inc., is offering the five-year securities with a 3.25 percent to 3.75 percent coupon, according to terms for the deal obtained by Bloomberg. The bonds have a 40 percent to 45 percent conversion premium, the terms show.
iQiyi is seeking more funding just eight months after completing its $2.4 billion initial public offering, which ranked as the biggest Chinese share sale in the U.S. this year.
The Netflix-style service has lost more than half its market value since peaking in June amid growing concerns about its spending on producing and licensing new shows. Third-quarter content costs rose 66 percent to 6 billion yuan ($863 million) as it attracted tens of millions of new subscribers with offerings including the popular Qing dynasty drama “Story of Yanxi Palace.”
This month, iQiyi announced an agreement to make “The Late Late Show with James Corden” available on demand in China through its platform.
In addition to content and technology investment, proceeds from the offering will be used to pay for capped call transactions that are expected to reduce potential shareholder dilution when the notes are converted, an iQiyi statement shows.
iQiyi’s shares are trading 11 percent above their IPO price, giving the company a market value of $14.4 billion.
Bondholders will have the option to require the company to repurchase all or part of their securities in December 2021, according to the statement. Goldman Sachs Group Inc., Bank of America Corp. and JPMorgan Chase & Co. are arranging the sale.
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