Xtep refinances HK$500m debt via new bond

Chinese sportswear company Xtep International Holdings has launched a concurrent repurchase of outstanding convertible bonds and the issuance of new notes as it extends its debt maturity profile.

The Hong Kong-listed group plans to repurchase HK$500 million (€58.4m) in aggregate principal of its 1.5 percent convertible bonds due 2026, while simultaneously issuing HK$500 million in zero coupon convertible bonds maturing in 2029. UBS AG Hong Kong Branch serves as sole overall coordinator, lead manager, and dealer manager for both transactions.

Strategic extension of debt maturity

The refinancing maneuver allows Xtep to push back its debt obligations by three years while securing funds at what the company describes as lower funding costs. The new bonds carry zero interest compared to the 1.5 percent coupon on the existing 2026 notes.

Xtep has already secured commitments from eligible bondholders to sell the entire HK$500 million principal amount of the 2026 bonds, representing 100 percent of the outstanding aggregate. The company will pay 100.50 percent of principal plus accrued interest to participating bondholders.

The existing 2026 convertible bonds, issued in February 2025 and listed on the Vienna Stock Exchange, are currently convertible into approximately 83.2 million shares at an adjusted conversion price of HK$6.01 per share.

New bond terms favor later dilution

The 2029 bonds will be issued at par with an initial conversion price of HK$6.37 per share, representing a 23.93 percent premium over the HK$5.14 closing price on Jan. 30. At full conversion, the new bonds would convert into approximately 78.5 million new shares, equivalent to 2.80 percent of Xtep’s current issued share capital.

The conversion price represents a premium of 24.90 percent over the five-day average trading price and 23.91 percent over the 10-day average preceding the transaction announcement.

Bondholders may convert their holdings starting 41 days after the Feb. 6 closing date through 10 trading days before the Feb. 6, 2029 maturity. Unless converted earlier, the bonds will be redeemed at 104.59 percent of principal at maturity.

The new bonds include optional redemption provisions allowing Xtep to call the entire issue if 90 percent or more has been converted or repurchased. Bondholders can require redemption on Feb. 6, 2028 at 103.03 percent of principal.

Funding from general mandate

Xtep will issue the conversion shares under its existing general mandate approved at the April 2025 annual general meeting, which authorizes issuance of up to 554.9 million new shares. The transaction requires no additional shareholder approval.

The Hong Kong Stock Exchange granted approval under Rule 10.06(3) of the Listing Rules for the concurrent bond issue, which is required because the transaction occurs simultaneously with the repurchase. Xtep has also obtained the Enterprise Foreign Debt Review and Registration Certificate from China’s National Development and Reform Commission.

Net proceeds of approximately HK$492 million will fund the repurchase of the 2026 convertible bonds. The board considers the terms fair and reasonable, noting the transaction provides lower funding costs without immediate dilution to existing shareholders.

Both transactions are scheduled to close Feb. 6, subject to conditions precedent in the subscription and dealer manager agreements. The new bonds will be listed on the Vienna Stock Exchange upon completion.