Latham & Watkins Advises on TAL Education Group’s US$200 Million Convertible Senior Notes Issuance

The unique transaction included a call spread overlay, which has only been completed a handful of times in Asia by a US-listed company.

August 27, 2014

TAL Education Group, a US-listed after-school tutoring services provider in China, has completed a US$200 million issuance of convertible senior notes due 2019. Latham & Watkins represented the joint bookrunners, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. International plc, as product counsel on the issuance.

The convertible bonds featured a five-year maturity and a three-year investor put option. This offering was one of a few deals in Asia to feature a capped call, which is generally expected to offset dilution upon conversion of the bonds if the volume weighted average price of the ADSs exceed the strike price of the capped call. The deal was launched with a base of US$200 million plus an upsize option of US$30 million, which was promptly exercised.

“We are delighted to have advised on this unique bond issuance, which included a capped call overlay. This transaction is a great example of our strong product expertise in both equity-linked and equity derivatives markets, and the trust of our clients to execute US style transactions in Asia," said Latham & Watkins' Posit Laohaphan, a partner in the firm’s Hong Kong office and co-lead of the deal team.

“This transaction is particularly noteworthy in the market and it further demonstrates our ability to handle complex transactions,” commented Witold Balaban, a partner in the firm’s New York office who co-led the deal team.

The Latham & Watkins team was co-led by Hong Kong partner Posit Laohaphan and New York partner Witold Balaban, with New York associates Reza Mojtabaee-Zamani and Casey Plant and Hong Kong associate Jennifer Poh.

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