iQIYI Inc. Contemplates Extending Convertible Bonds to Ease Debt Pressure

Chinese online video platform iQIYI Inc., which has retained Kirkland & Ellis and Houlihan Lokey as its respective legal and financial advisors, is considering extending its convertible bonds as part of an overall plan to alleviate debt pressure, said two sources familiar with the matter.

iQIYI Inc. earlier announced on Jan. 3 the closing of a private placement of $500 million in secured convertible 6% five-year senior notes to PAGAC IV-1 (Cayman) Ltd. The notes are convertible into iQIYI's American depositary shares (ADS) at an initial conversion rate of 216.9668 ADSs per $1,000 principal amount of the notes.

With the closing of the PAG investment, investors expect the company to provide a more friendly plan if it were to launch any exchange offer or consent solicitation, said two buyside sources.

On its upcoming maturities, the company has its $1.2 billion 2% convertible notes due 2025 putable on April 1, 2023 and its $3.2 million 3.75% convertible notes due Dec. 1.

The company also has $900 million 4% convertible senior notes due 2026.

iQIYI previously hinted at a potential LME during its earnings call for the second quarter of 2022, with management stating that alongside the proposed $500 million convertible notes to be privately placed with PAG, the company still requires cooperation from various stakeholders - such as its noteholders - to solve its debt overhang.

iQiyi did not respond to an emailed request for comment as of press time.

Below is the company’s capital structure: