Solely arranged by J.P. Morgan, the first tranche amounting to US$700 million has a five-year maturity with an interest rate of 1%, or at the middle of the indicative range of between 0.75% and 1.25%. The notes, puttable at year three, will be convertible into Ctrip’s American Depositary Receipts (ADRs), each representing 0.25 of an ordinary share of Ctrip, at the option of the holders, based on an initial conversion rate of 9.1942 of the ADRs. This is equivalent to an initial conversion price of about US$108.76 per ADRs, or 45% conversion premium over the closing trading price of US$75.01 on June 18.

 

The other tranche amounting to US$400 million has a 10-year maturity with an interest rate of 1.99%, or near the top of the marketing range of between 1.50% and 2%. The notes, puttable at year five, will also be converted into Ctrip ADRs, at the option of the holders, based on an initial conversion of 9.3555 of the company’s ADRs. This is equivalent to an initial conversion price of about US$106.89 per ADRs, or 42.5% conversion premium over the closing trading price on June 18.

 

Ctrip has granted an over-allotment option of US$105 million for the five-year notes and US$60 million for the 10-year notes.

 

Ctrip will not have the right to redeem the notes prior to maturity except in the event of certain tax law changes. Holders on the notes will have the right to require the company to repurchase for cash all or part of the five year notes on July 1 2018 and all or part of the 10-year notes on July 1 2020 at a price equal to 100% of the principal amount.

 

The company intends to use a portion of the net proceeds to pay the cost of call spread transactions, which it expects to enter into with one or more third party financial institutions. The rest will be used for other general corporate purposes, including a concurrent repurchase of the ADRs and potential note retirement from time to time.

 

Ctrip, the largest online consolidator of accommodations and transportation tickets in China in terms of transaction volume, last tapped the CB market in October 2013 for US$800 million, which was upsized from the initial target of US$500 million due to strong demand and after exercising the greenshoe of US$100 million. The notes had a tenor of five years and an investor put at par at the end of the third year. The conversion premium were set at 42.5% and the coupon at 1.25% - both at the aggressive ends of conversion guidance of between 37.5% and 42.5%, and coupon of between 1.25% and 1.75%, respectively.

 

The latest CB offering followed Ctrip’s announcement on June 3 that it was no longer interested in pursuing a potential merger and acquisition discussion with Qunar Cayman Islands, given Qunar’s recent earnings performance and corporate actions.

 

After being approached by Qunar, a Chinese mobile and online travel platform, Ctrip sent a preliminary proposal to Qunar’s board of directors in early May, indicating its interest in pursuing a potential transaction with Qunar, which eventually declined the proposal, but indicated it would be opened to having further discussions on the matter.

 

On May 26 2015, Ctrip announced that The Priceline Group will invest an additional US$250 million into the company. The investment will be made via a CB and Ctrip has granted permission to Priceline to increase its ownership in the company through the acquisition of Ctrip’s ADRs in the open market so that, when combined with the shares that can be issued upon conversion of the new bond and the US$500 million CB issued to Priceline in August 2014, the latter may hold up to 15% of Ctrip’s outstanding shares.

 

This investment followed a commercial relationship established between the two companies in 2012