Horizon Robotics-W (09660.HK): Amends Convertible Loan Agreement; Issues 1.3 Billion New Class B Shares to CARIAD and Pays USD 399M Cash
NewTimeSpace News: Horizon Robotics (stock code: 9660) announced on July 22 the amendment of the convertible loan agreement and the 12-month voluntary lock-up commitment by CARIAD Estonia AS.
Reference is made to the section "History, Restructuring and Corporate Structure—Convertible Loan" in the Company's prospectus dated October 16, 2024, regarding the convertible loan agreement dated November 17, 2022 between the Company (as borrower) and CARIAD Estonia AS ("CARIAD") (as lender) (the "Convertible Loan Agreement," subsequently amended on October 11, 2024).
Under the Convertible Loan Agreement, the Company issued a convertible loan with a principal amount of USD 924,855,491.33 on December 7, 2023, with a maturity date of December 7, 2026 (the "Maturity Date"), subject to extension under the terms and conditions of the Convertible Loan Agreement. The loan bore interest at (i) 2.67% per annum from December 7, 2023 to December 7, 2025, and (ii) 5.67% per annum from December 7, 2025 to the date of conversion or repayment (as applicable), with accrued interest of approximately USD 81.9 million as of July 21, 2026 (the "Base Date"). Upon maturity, shares subject to the 9.9% threshold would be mandatorily converted to CARIAD or its affiliates, while the balance (the "Remaining Portion") would be settled in cash or converted at CARIAD's option, subject to the terms of the Convertible Loan Agreement. The conversion price was HKD 3.99 per share, a discount to the closing price of HKD 4.45 per share on the Base Date.
Given that the conversion price of HKD 3.99 was below the prevailing market price, converting the relevant accrued amounts into shares exceeding the 9.9% threshold at maturity could result in additional shares being issued at a discount to the then-prevailing market price, potentially diluting existing shareholders' holdings. Therefore, to amend the Convertible Loan Agreement, the Company and CARIAD entered into an amendment agreement (the "Amendment Agreement") on July 22, 2026, pursuant to which the Company will early repay the convertible loan and redeem the conversion rights held by CARIAD under the Convertible Loan Agreement (the "Early Redemption").
Key terms of the Amendment Agreement: the Company will issue 1,301,763,486 new Class B ordinary shares (the "Conversion Shares") to CARIAD, such that CARIAD and its affiliates will hold shares equivalent to 9.9% of the total issued shares outstanding immediately following the issuance (the "9.9% Threshold"). The issuance of Conversion Shares will settle and discharge USD 662.4 million of outstanding principal and accrued interest under the Convertible Loan Agreement. The Company will pay CARIAD a total of USD 398.9 million, comprising (i) a loan repayment amount of approximately USD 344.4 million (the "Excess Portion") for the portion of principal and accrued interest not settled through the issuance of Conversion Shares, and (ii) an additional cash payment of approximately USD 54.5 million (the "Additional Cash Payment") as consideration for redeeming the conversion rights (the "Conversion Rights") relating to approximately 716 million Class B ordinary shares (the "Redeemed Conversion Shares") that would have been issued at maturity. Unless otherwise agreed, settlement (including issuance of Conversion Shares, payment of the Excess Portion, and the Additional Cash Payment) will occur on or before the eighth business day following the date of the Amendment Agreement. CARIAD will commit to a 12-month lock-up from the date of Early Redemption settlement for the Conversion Shares and its existing 269,711,694 Class B ordinary shares (collectively, the "Locked-up Shares"), subject to customary exemptions. Upon completion of the Early Redemption, the Convertible Loan Agreement will be fully terminated, and all rights and obligations thereunder will cease.
The Additional Cash Payment of USD 54.5 million was determined through fair negotiation between the Company and CARIAD. In assessing the Additional Cash Payment, the Company referenced the indicative theoretical value of the Conversion Rights estimated using the Black-Scholes option pricing model, with key assumptions including: expected volatility of 53.6% (annualized historical volatility based on the Company's share price movement over the 0.381-year period prior to the Base Date); expected dividend yield of 0%; risk-free rate of 2.78%; and USD/HKD exchange rate of 7.8418 at 5:00 p.m. on the Base Date. After considering these factors, the Company agreed to the consideration for the Conversion Rights, representing an approximate 28.8% discount to the above indicative theoretical value.
The Board believes that by entering into the Amendment Agreement rather than allowing the Convertible Loan Agreement to remain outstanding until maturity, key considerations include: ongoing accrued interest, potential dilution impact from settling the convertible loan through share issuance under the existing agreement, and uncertainties related to share price and exchange rate at or around maturity. Specifically, the Amendment Agreement enables the Company to avoid its obligation to issue the Redeemed Conversion Shares at the conversion price of HKD 3.99 per share for the Remaining Portion (representing approximately 4.9% of the Company's total issued shares as of the date of this announcement on a pre-conversion basis), thereby reducing potential dilution to existing shareholders and alleviating potential downward pressure on the share price that would have resulted from such issuance. Additionally, CARIAD's 12-month lock-up commitment on the Locked-up Shares restricts immediate sale and helps maintain share price stability, which is conducive to maintaining a fair and orderly market for the shares. The Company intends to fund the cash payments under the Amendment Agreement using internal resources and/or external financing (including equity financing, bank borrowings, and bond issuance).
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