#China #Shanghai #Senior Notes #Convertible Notes #ZTO Express

ZTO Express Announces $1.5 Billion Offering of Convertible Senior Notes

On February 4, 2026, ZTO Express (Cayman) Inc., a prominent express delivery company based in China, signified its strategic growth ambitions by announcing the pricing of $1.5 billion in convertible senior notes. These notes, which are set to mature in 2031, are aimed primarily at qualified institutional buyers outside the U.S.

Purpose of the Offering

The proceeds from the offering will be utilized for several key purposes. Approximately $1,000 million is allocated for refinancings, particularly to fund on-market repurchases of the company's Class A ordinary shares, depending on market conditions. An additional $500 million will support a concurrent share repurchase and the premium related to capped call transactions. Furthermore, remaining funds will be directed toward general corporate purposes which may include addressing ongoing operational costs.

Features of the Notes

The convertible notes will bear a low-interest rate of 0.925% per annum, with interest payments commencing on September 1, 2026. Their initial conversion rate is pegged at 32.3130 shares per $1,000 principal amount, amounting to a conversion price of about HK$241.79 per share, reflecting a 35% premium over the closing price on the announcement date.

Importantly, the company does not permit conversions of these notes until 40 days post-issuance. After this period, bondholders can convert their notes anytime until the close of business on the fifth trading day before the due date.

Redemption and Repurchase Options

ZTO Express holds the right to redeem these notes under specific conditions, notably if less than 10% of the original issuance remains outstanding. The imminent redemption could also be triggered by significant tax law changes. Notably, the earliest redemption won’t occur until 2029, assuring investors that the company is focused on facilitating a long-term investment horizon.

Furthermore, holders will have the opportunity to demand a repurchase of their notes under certain fundamental changes, ensuring a degree of safety and liquidity for investors.

Capped Call Transactions

In conjunction with the notes, ZTO has entered capped call transactions designed to mitigate potential dilution of its shares when holders opt for conversion. These transactions, capped at $35.9906 per share, serve not only to manage share value post-conversion but also to offset cash payments that exceed the bonds’ principal amount.

Market Implications

The announcement has significant implications for ZTO’s stock performance. With this funding, the company plans to ensure ample resources for meeting the demand posed by the burgeoning e-commerce landscape in China. The ongoing strategy to repurchase shares indicates a commitment to enhancing shareholder value, particularly as ZTO navigates its growth trajectory amidst competition.

Conclusion

With the closing of the notes offering anticipated around February 9, 2026, ZTO Express is ardently positioning itself to bolster its delivery capabilities and subscriber base. The calculated issuance of convertible notes comes at a pivotal time as the company aims to sustain and scale its operations further in the competitive express delivery market. Investors and analysts alike will be closely observing the developments of this offering and its long-term effects on ZTO’s performance in the market.

For more information regarding ZTO Express, please visit their investor relations page.