Dec 22, 2005. /Lesprom Network/. Lee & Man Paper Manufacturing has raised $1 billion from the sale of five-year convertible bonds which it will use to pay for further expansion. The issue saw strong demand from specialized convertible bond investors, which allowed the size to be increased from an initial $800 million and the conversion premium to be fixed at 40% - the highest for a Hong Kong convertible since 1993, according to Deutsche Bank, which arranged the sale. The bonds were initially offered to investors at a conversion premium between 35% and 40%. The confidence stems partly from the fact that the share price has more than doubled since the company first sold shares at $4.17 each in connection with its listing in September 2003 and confidence also stems from the fact that the management has delivered strong earnings growth. Last month, Lee & Man reported a 59% increase in its net profit for the six months to September to $309.35 million on a 49% rise in revenue to $1.86 billion due to improved economies of scale. The bonds will not pay any interest but investors have the right to sell them back to the company in year two at 109.39% of face value, translating into a yield of 4.5%. If they have not been exercised, the bonds will be redeemed at 124.92%, also equal to a 4.5% yield. The bonds can be converted into shares in the company at $12.04 each compared with the latest price of $8.60 on Tuesday. The shares were suspended from trading on Tuesday afternoon and on Wednesday pending the completion of the bond sale. The company will use part of the proceeds to pay for the $259.51 million acquisition of a custom-built paper machine for linerboard and corrugating medium from Finnish pulp and paper machinery and equipment manufacturer Metso Paper, which was announced last week. Lee & Man has said it may also acquire additional production equipment, including a stock preparation unit and pumps, from the same vendor in the coming 12 months. The new machine, called paper machine VIII, is expected to begin operations in the first quarter of 2007 and will boost the company's annual production capacity by 25% to 2 million tonnes. Lee & Man Paper was founded in 1994 with a mission to be the leading paper company in Asia. The company was listed on the main board of the stock exchange of Hong Kong Limited on 26 September 2003. By strategically positioning its manufacturing facilities in the most dynamic regions of China, Lee & Man Paper is positioned at the forefront of containerboard industry to grasp the vast opportunities within China.