EV Maker Nio Offers $1.5 Billion of New Debt at 0% Interest

Following the launch of its ET7 premium sedan, China-based electric vehicle (EV) maker Nio Ltd. (NYSE: NIO) is selling $1.5 billion in convertible senior notes with a coupon of 0.0% to 0.5%. The offering is expected to price Tuesday.

The notes will be issued in two tranches, one due in 2026 and one due in 2027. Each tranche is valued at $650 million. The notes are senior, unsecured obligations of the company and may be exchanged for Nio’s American depositary shares (ADSs). Each ADS is equal to one share of Nio’s Class A common stock.

Demand for Nio’s surging ADSs has made it possible for the company to issue this no-interest debt. Less than a year ago, Nio sold $750 million in senior unsecured debt with a coupon of 4.5% when the company’s shares were trading at around $7.50 each. Shares closed at $62.70 on Monday after posting a new 52-week high of $66.99.

The conversion premium on the new debt is reportedly 45% to 50%, compared to a premium of 27.5% for the debt issued a year ago.

Nio’s new ET7 is not scheduled to begin deliveries to customers until next year, but Monday’s launch revved up interest in the company’s stock. The premium sedan includes the company’s first fully automated driving system, along with a 150-kilowatt-hour battery that is estimated to give the car a range of more than 600 miles.

Just last month, Nio raised more than $3 billion in a follow-on offering of some 68 million ADSs priced at $41.98. That followed an August offering of 88.5 million ADSs at $17.00 a share that raised $1.5 billion in net proceeds. The company raised $1.5 billion in net proceeds from an August offering of 88.5 million ADSs at $17.00 per share.

The underwriters of the proposed offering (Credit Suisse, Goldman Sachs, Morgan Stanley and China International Capital) have a 30-day option for an additional $100 million on each tranche.

The notes are convertible with restrictions before August 1, 2025, (or August 1, 2026,) and with no restrictions thereafter. Nio is required to repurchase the notes at their full purchase price in cash on February 1, 2024, “in the event of certain fundamental changes.”

Nio’s shares traded down fractionally Tuesday morning, at $62.41 in a 52-week range of $2.11 to $66.99. The consensus price target is $46.21.