The $500 million 2029 notes bear interest at a rate of 3.875 percent per year and the other $500 million 2030 notes at 4.625 percent.

Nio (NYSE: NIO) announced the pricing of its planned $1 billion convertible note offering, with a coupon rate slightly lower than the upper end of the range it reportedly sought.

The company's planned offering of convertible senior notes consists of an aggregate of $500 million due 2029, and $500 million due 2030.

Initial purchasers will have 30 days from the date of issuance of the notes to exercise an option to purchase up to an additional $75 million aggregate principal amount of the 2029 notes and up to an additional $75 million of the 2030 notes.

The 2029 notes bear interest at a rate of 3.875 percent per year, payable semiannually in arrears on April 15 and October 15 of each year, beginning April 15, 2024, according to Nio's announcement today.

The 2030 notes bear interest at 4.625 percent per year, payable semiannually in arrears beginning April 15, 2024, on April 15 and October 15 of each year.

Nio announced the plan yesterday to issue $1 billion in convertible senior notes, and Bloomberg later reported that the electric vehicle (EV) maker was seeking a coupon rate of 3.5 percent to 4.0 percent for the 2029 notes, with a conversion premium of 27.5 percent to 32.5 percent of the share price.

The company sought a coupon rate of 4.25 percent to 4.75 percent for the 2030 notes, with a conversion premium of 27.5 percent to 32.5 percent of the share price, Bloomberg said yesterday, citing a person familiar with the matter.

The 2029 notes will mature on October 15, 2029, and the 2030 notes will mature on October 15, 2030, unless repurchased, redeemed or converted in accordance with their terms before that date.

Holders may convert the notes prior to the maturity date, and upon conversion, Nio will pay or deliver to such converting holders cash, American Depositary Shares (ADSs), or a combination of cash and ADSs. Each ADS of Nio currently represents one class A ordinary share of the company.

The initial conversion rates for both of these 2029 notes and 2030 notes are 89.9685 ADSs per $1,000 principal amount, which equates to an initial conversion price of about $11.12 per ADS. The conversion price represents a premium of about 30 percent to Nio's closing price of $8.55 on September 19.

For the 2029 notes, noteholders may require Nio to repurchase all or a portion of the notes on October 15, 2027 for cash. For the 2030 notes, that date is October 15, 2028.

Nio expects to use a portion of the net proceeds from this note offering to repurchase about $256 million in aggregate principal amount of the company's outstanding 0.00 percent convertible senior notes due 2026 and about $244 million in aggregate principal amount of its outstanding 0.50 percent convertible senior notes due 2027.

The company expects to complete the note offering and repurchase transactions on or about September 22, 2023.

Nio fell 17.07 percent at the close of the US stock market on Tuesday, its biggest one-day drop in four years. At press time, it was up 2.22 percent in after-hours trading on Tuesday.

The convertible note issue is not good news for Nio and could easily lead to market panic, local media Yicai said in a report yesterday, citing an unnamed hedge fund manager.

Nio's shares are currently underpriced, and the market's interpretation is generally that the company's cash flow is tight, which is a negative for ordinary investors, the fund manager said.

But from an optimistic point of view, it could be helpful for Nio's business to advance further, the fund manager added.

Nio announces plan to issue $1 billion convertible notes, shares down after-hours