(Yicai) May 29 -- China’s Lenovo Group, the world’s biggest maker of personal computers, plans to issue USD2 billion of zero-coupon convertible bonds to a unit of Saudi Arabia’s sovereign wealth fund, with the new financing mainly used to pay back debt.

The three-years bonds give Industrial Company for Electronics, the unit of Public Investment Fund better known as Alat, the right to convert the notes into nearly 1.5 million Lenovo shares, equal to 10.8 percent of its total equity after the bond sale, at an initial conversion price of HKD10.42 per share, the Beijing-based firm said in a stock exchange filing today.

That represents an about 11.8 percent discount on Lenovo's closing share price yesterday. Lenovo [HKG: 0992] fell 1.7 percent today in Hong Kong to close at HKD11.62 (USD1.48), though the stock is still up by more than 40 percent since April 12.

In addition to repaying debt, the proceeds of the bond sale will be used to supplement operational capital and fund other general corporate purposes, Lenovo said.

Lenovo is the latest Chinese company to raise financing through convertible bonds. E-commerce giants Alibaba Group Holding and JD.Com did so recently, with a view to funding stock buybacks.

Under their agreement, Lenovo will also set up a regional MEA headquarters and a new manufacturing base in Saudi Arabia, while Alat will support and provide assistance to ensure the smooth implementation of the deal.

“The manufacturing facility will extend Lenovo's existing global presence and manufacturing footprint, which already includes over 30 manufacturing sites around the world,” it said. “The strengthened presence in the MEA region will enable Lenovo to enhance its global supply chain resilience and flexibility while serving customers in the region more nimbly.”

Through the tie-up with Alat, Lenovo expects to have greater financial flexibility to implement its proven strategy, and will further drive its global transformation into a solutions and services-led business, the Chinese firm noted.

“The strategic cooperation is expected to enable Lenovo to accelerate its ongoing global strategic transformation, enhance its global presence, increase geographic diversification of its manufacturing footprint, and capitalize on the growth momentum of the information technology and business services in the Middle Eastern and African region,” it said.

The deal serves as a strong endorsement of Lenovo's transformation strategy, strong execution, operational excellence, commitment to sustainability, and continuous investment in innovation, Lenovo added.

Editor: Futura Costaglione