China-based New Oriental, a $21 billion after-school tuition provider listed in New York, has announced that it will raise $300 million of debt via Hong Kong’s stock exchange.

The firm, which is one of the largest education providers in the world, will tap public markets at a time when many of its thousands of tuition centres across mainland China remain closed due to Covid-19.

The notes, which will pay interest of 2.125% and mature in 2025, will generate net proceeds of around $297.1 million for New Oriental, it said, after deducting bookrunners’ commissions and offering expenses.

BofA Securities and UBS Hong Kong are joint bookrunners on the bond offering.  

New Oriental, which makes most of its money from providing in-person tuition to schoolchildren, said in a statement that it intends to use the funds for “general corporate purposes”.

But one source suggested that the money would be used to meet short-term debt repayments.

The source said: “Centres in China have been closed for a while. This must be to cover short-term debt.”

New Oriental uses little debt in its capital structure, evidenced by its debt-to-capital ratio of 3.89%.

Last year, the firm had total debt of less than $100 million – compared with nearly $5 billion in total assets.

The bond offering will see New Oriental more than triple its current debt load.

Year-to-date, New Oriental’s share price is relatively flat, standing at $131.18.

Year-on-year, it is up nearly 36%.

In March, at the height of the coronavirus crisis, New Oriental sank to $103.85. 

Date published: 30 June 2020

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