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Fortescue shares offered in exchangeable bond transaction

Fortescue shares offered in exchangeable bond transaction

A Chinese steel manufacturer has announced one of the first exchangeable bond transactions to feature ASX-listed company shares.

Firms: Allens, Latham & Watkins and Jia Yuan Law Office (Hunan Valin Iron and Steel Group Co.Ltd); Ashurst and KWM (Duetsche Bank AG)

Deal:  Chinese steel manufacturer Hunan Valin Iron and Steel Group Co.Ltd (Hunan Valin) has announced the issuance of zero coupon bonds for shares in Fortescue Metals.

Value: US$355 million

Area: M&A

Key players:  The Allens team advising Hunan Valin was led by partners Julian Donnan (pictured), James Darcy and Martin Fry. Senior counsel Thomas McAuliffe, senior associates Katrina Huang and Addison Ma and solicitor Anthony Tridgell assisted.

Deal significance:

Hunan Valin is a Chinese steel manufacturer and the largest state-owned enterprise in the Hunan province. In terms of production volume it is among the top 10 steel manufacturers in China.

This month the company announced the US$355-million-dollar issuance of zero coupon bonds, exchangeable for approximately 65 million shares in Fortescue Metals Group Ltd.

Deutsche Bank AG has taken on the role of sole lead manager and book runner for the transaction.

A statement released by Allens, who advised Hunan Valin on the Australian aspects of the deal, said that net proceeds of the issuance of exchangeable bonds will be used for “capital and general corporate purposes”.

Allens partners James Darcy, Julian Donnan and Martin Fry led the team advising the steel manufacturer.

Commenting on the deal, Mr Donnan said: “There have been few exchangeable deals in the Australian market recently, as opposed to convertibles, so it was a great opportunity to be involved in a deal of this complexity, combining both debt and equity skill-sets.”

Issuance of US$355 million zero coupon bonds is due by 2021.

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