Geely jumps to 9-year high after Goldman bond sale

Geely Automobile Holdings Ltd. surged [yesterday] to the highest in more than nine years after saying it will raise HK$2.59 billion ($334 million) selling convertible bonds and warrants to a fund managed by Goldman Sachs Group Inc.

China's largest carmaker outside state control rose 19 percent to HK$2.13, the highest close since March 2000. GS Capital Partners VI Fund LP will own 15.1 percent of Geely should it convert the bonds and exercise the warrants, according to a stock exchange statement.

Geely, whose parent is considering a bid for Volvo Car Corp., said it may use some of the funds from the note sale for acquisitions. Warren Buffett has also invested in Chinese carmaker BYD Co. as the nation's economic growth and government stimulus measures put China on course to pass the U.S. as the world's biggest auto market.

"Geely has better growth prospects than other publicly traded automakers in Hong Kong, with good returns to investors and a very experienced management team," said Rebecca Tang, an analyst at CIMB-GK Securities HK Ltd. "There is still room for the stock to rise."

The automaker has more than tripled this year, compared with the benchmark Hang Seng Index's 50 percent gain. The automaker last traded on Sept. 15 before today.

Paper Profit

The Goldman fund can convert its bonds into 908.4 million new shares at HK$1.90 apiece. That means it is already set for a HK$209 million paper profit. The bonds pay 3 percent per annum in interest. New shares created within the first 12 months of the bonds' yet-to-be-set issue date will be subject to a 12- month lock-up period, according to the statement.

The warrants can be converted into 299.5 million new shares at an exercise price of HK$2.30 each.

Geely intends to work with the Goldman fund "to further strengthen our financial management, operational efficiency and corporate governance practices," it said in an e-mailed statement.