Hon Hai Precision Industry Co (鴻海精密), the world’s largest contract electronics maker, said yesterday that it would issue US$1 billion of overseas convertible bonds on Oct. 12 to meet funding demand for overseas production material purchases.
Hon Hai said the capital to be raised from the bond sales would also be used to repay debt in an attempt to cut interest payments.
It said the convertible bonds will have a maturity of three years with a zero coupon rate, adding that it has set a conversion price of NT$152.75 (US$4.90) for each Hon Hai share for bondholders who would like to exchange their bonds for company shares.
On July 19, Hon Hai scrapped an earlier bond sale plan because its stock price “failed to reflect the company’s value” after the stock got hammered by a string of suicides by workers at its Shenzhen complex earlier this year.
Hon Hai said the cancellation of the bond issuance plan was also because the date of issuance approved by the Financial Supervisory Commission had expired.
However, the company resurrected the plan on July 24 by revising the terms of the bond sale to a three-year maturity, rather than the previous five-year offering.
“I suspect Hon Hai might expand its business through acquisitions or mergers in the near future, for which funds will be necessary,” Grand Cathay Securities (大華證券) analyst Mars Hsu (徐振家) said.
Grand Cathay Securities said Hon Hai’s short term debt totaled NT$171.4 billion as of the second quarter of this year.
In related news, Hon Hai, which uses the name Foxconn Technology Group (富士康) in China, has decided to raise salaries by two-thirds at its Shenzhen factory, Xinhua news agency reported yesterday.
Xinhua quoted Foxconn spokesman Liu Kun (劉坤) as saying the roughly 66 percent pay raise for assembly line workers, the second this year, would bring salaries to 2,000 yuan (US$298.9) a month. The raise takes effect this month.
The increase will benefit about 85 percent of workers at the Shenzhen factory, the report said.
Foxconn increased salaries by 30 percent in June, from 900 yuan to 1,200 yuan a month, for its Shenzhen employees.
Eleven suicides this year at the Shenzhen complex brought intense scrutiny of Hon Hai, which makes the iPhone and other products for Apple and also counts Dell and Hewlett-Packard among its clients.
The company has tried addressing the problem by improving living conditions for workers, organising activities to boost moral and bumping up wages
Hon Hai said in August it would have as many as 1.3 million workers in China by the end of next year, up from 920,000 now, but would focus the expansion away from the Shenzhen plant.
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