GDS Announces Proposed Offering of US$450 Million Convertible Senior Notes
- Additional US$450 million in funding through convertible notes offering
- Option for additional US$50 million in notes
- Flexibility in redemption options provides financial management opportunities
- Concurrent offerings demonstrate multiple funding channels
- Potential dilution for existing shareholders upon conversion
- Increased debt burden with new notes
- Complex financing structure with three concurrent offerings may increase execution risk
- Additional interest payment obligations until 2032
Insights
GDS's $450M convertible note offering provides liquidity but increases debt burden; terms allow flexibility with conversion features and multiple redemption options.
GDS Holdings is making a strategic financial move with its $450 million convertible senior notes offering due 2032, with potential for an additional $50 million. The terms structured into these notes reveal careful financial engineering to balance flexibility with attractive terms for institutional investors.
The notes' convertible structure gives GDS significant flexibility in satisfying its obligations - they can pay in cash, ADSs (each representing 8 Class A shares), or a combination. This optionality is valuable for managing future capital structure decisions. The 2032 maturity provides a long runway, though investors have a put option in 2029, effectively creating a 4-year financing with a 3-year extension option at GDS's discretion.
The company has specifically earmarked proceeds for working capital and refinancing existing debt, including potential repurchases of convertible bonds due 2029. This suggests a liability management strategy rather than aggressive expansion capital. By potentially retiring 2029 maturities, GDS is extending its debt profile and managing near-term refinancing pressures.
The multiple redemption provisions are noteworthy: GDS can't redeem before June 2029 except for tax changes or when 90% of notes have already converted (cleanup provision). After June 2029, redemption is possible if the ADS price exceeds 130% of conversion price across specified trading periods. This creates a natural cap on investor returns while giving GDS flexibility if their stock appreciates significantly.
The concurrent activities - the delta placement of borrowed ADSs and primary ADS offering of 5.2 million shares - create a complex capital markets transaction. The borrowed ADS structure facilitates hedging by note purchasers, which typically results in more favorable conversion terms for the issuer. However, these interlinked offerings also mean heightened execution risk as failure of one component would trigger termination of the others.
GDS's convertible note and equity offerings create short-term dilution pressure while addressing refinancing needs; structure suggests defensive financial positioning.
This multi-part financing transaction reveals important insights about GDS's current financial positioning. The company is simultaneously executing three interlinked offerings: a $450 million convertible note issuance, a delta placement of borrowed ADSs, and a 5.2 million primary ADS offering (expandable by 780,000 shares). This complex structure suggests GDS is facing some pressure to strengthen its balance sheet.
The convertible notes feature a 2032 maturity but include a critical investor put right in 2029, effectively creating a shorter financing term with extension potential. This structure is typically more expensive than straight debt but offers lower interest rates than traditional bonds. Given that proceeds are earmarked primarily for refinancing existing debt rather than growth initiatives, this suggests a defensive financial posture focused on addressing near-term maturities rather than funding expansion.
The concurrent equity offering creates immediate dilution for existing shareholders. While the borrowed ADS structure is designed to minimize the impact of hedging activities, the combined effect of these transactions will likely put downward pressure on the stock in the near term. The market will be digesting both increased debt and equity dilution simultaneously.
The provision allowing holders to convert to Class A ordinary shares instead of ADSs suggests consideration for the company's dual-listing structure (NASDAQ and HKEX). This flexibility may help attract investors with preferences for direct Hong Kong listing exposure.
The conditionality between all three offerings creates execution risk - if one fails, they all terminate. This all-or-nothing approach indicates the company has designed these as complementary elements of a comprehensive refinancing strategy rather than independent capital-raising initiatives. The market reaction will hinge on whether investors view this as proactive liability management or a sign of financial strain necessitating multiple simultaneous capital raises.
SHANGHAI, China, May 27, 2025 (GLOBE NEWSWIRE) -- GDS Holdings Limited (“GDS Holdings”, “GDS” or the “Company”) (NASDAQ: GDS; HKEX: 9698), a leading developer and operator of high-performance data centers in China, today announced the commencement of a proposed offering (the “Notes Offering”) of convertible senior notes in an aggregate principal amount of US
The Company plans to use the net proceeds from the Notes Offering for working capital needs and the refinancing of its existing indebtedness, including potential future negotiated repurchases, or redemption upon exercise of the investor put right, of its convertible bonds due 2029.
When issued, the Notes will be senior unsecured obligations of GDS. The Notes will mature on June 1, 2032, unless earlier redeemed, repurchased or converted in accordance with their terms prior to such date.
Prior to the close of business on the business day immediately preceding December 1, 2031, the Notes will be convertible only upon satisfaction of certain conditions and during certain periods. On or after December 1, 2031 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at their option at any time. Upon conversion, the Company will pay or deliver, as the case may be, cash, the Company’s American depositary shares, each representing eight Class A ordinary shares (the “ADSs”), or a combination of cash and ADSs, at the Company’s election. Holders may also elect to receive Class A ordinary shares in lieu of any ADSs deliverable upon conversion, subject to certain procedures and conditions set forth in the terms of the Notes. The interest rate, initial conversion rate and other terms of the Notes will be determined at the time of pricing of the Notes.
The Company may redeem for cash all but not part of the Notes (i) in the event of certain tax law changes (a “Tax Redemption”) and (ii) if less than
Holders of the Notes may require the Company to repurchase for cash all or part of their Notes on June 1, 2029. In addition, holders of the Notes have the option, subject to certain conditions, to require the Company to repurchase any Notes held in the event of a “fundamental change” (as will be defined in the indenture for the Notes). The repurchase price, in each case, will be equal to
The Company expects that certain purchasers of the Notes may establish a short position with respect to its ADSs by short selling its ADSs or by entering into short derivative positions with respect to its ADSs (including entering into derivatives with an affiliate of an initial purchaser in the Notes Offering), in each case, in connection with the Notes Offering. Any of the above market activities by purchasers of the Notes could increase (or reduce any decrease in) or decrease (or reduce any increase in) the market price of the Company’s ADSs or the Notes at that time, and the Company cannot predict the magnitude of such market activity or the overall effect it will have on the price of the Notes or its ADSs.
The Company also announced today by separate press release that the Company has commenced a separate registered public offering (the “Delta Placement of Borrowed ADSs”) of a certain number of its ADSs (the “Borrowed ADSs”) that the Company will lend to an affiliate (the “ADS Borrower”) of an initial purchaser in the Notes Offering in order to facilitate privately negotiated derivative transactions by some holders of the Notes for purposes of hedging their investment in the Notes. The Company expects to enter into an ADS lending agreement (the “ADS Lending Agreement”) with the ADS Borrower pursuant to which the Company will lend the Borrowed ADSs to the ADS Borrower. The ADS Borrower or its affiliate will receive all of the proceeds from the sale of the Borrowed ADSs and the Company will not receive any of those proceeds, but the ADS Borrower will pay the Company a nominal lending fee for the use of those ADSs pursuant to the ADS Lending Agreement. The activity described above could affect the market price of the Company’s ADSs or the Notes otherwise prevailing at that time.
The Company also announced today by separate press release that the Company has commenced a separate registered public offering (the “Primary ADSs Offering”) of 5,200,000 ADSs (the “Primary ADSs”), subject to market and other conditions. The underwriters in the Primary ADSs Offering will have a 30-day option to purchase up to 780,000 additional ADSs.
Nothing contained herein shall constitute an offer to sell or the solicitation of an offer to buy any securities, including the Notes, the Borrowed ADSs or the Primary ADSs, nor shall there be any offer or sale of the securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful. The Delta Placement of Borrowed ADSs and the Primary ADSs Offering are being made only by means of separate prospectus supplements and accompanying prospectuses pursuant to an effective registration statement filed with the U.S. Securities and Exchange Commission (the “SEC”). The closing of each of the Notes Offering, the Delta Placement of Borrowed ADSs and the Primary ADSs Offering is conditioned upon the closing of each of the other offerings and vice versa. If the Notes Offering is not consummated, the concurrent Primary ADSs Offering will terminate, the ADS loan under the ADS Lending Agreement will terminate, and the concurrent Delta Placement of Borrowed ADSs will terminate and all of the Borrowed ADSs (or ADSs fungible with the Borrowed ADSs or other substitute securities or property as provided for in the ADS Lending Agreement) must be returned to the Company.
The Notes, the ADSs deliverable upon conversion of the Notes, if any, and the Class A ordinary shares represented thereby or deliverable upon conversion of Notes in lieu thereof, have not been and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”) or any state securities laws, and are being offered and sold in the United States only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act.
About GDS Holdings Limited
GDS Holdings Limited (NASDAQ: GDS; HKEX: 9698) is a leading developer and operator of high-performance data centers in China. The Company’s facilities are strategically located in and around primary economic hubs where demand for high-performance data center services is concentrated. The Company’s data centers have large net floor area, high power capacity, density and efficiency, and multiple redundancies across all critical systems. GDS is carrier and cloud-neutral, which enables its customers to access the major telecommunications networks, as well as the largest PRC and global public clouds, which are hosted in many of its facilities. The Company offers co-location and a suite of value-added services, including managed hybrid cloud services through direct private connection to leading public clouds, managed network services, and, where required, the resale of public cloud services. The Company has a 24-year track record of service delivery, successfully fulfilling the requirements of some of the largest and most demanding customers for outsourced data center services in China. The Company’s customer base consists predominantly of hyperscale cloud service providers, large internet companies, financial institutions, telecommunications carriers, IT service providers, and large domestic private sector and multinational corporations. The Company also holds a non-controlling
Safe Harbor Statement
This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “aim,” “anticipate,” “believe,” “continue,” “estimate,” “expect,” “future,” “guidance,” “intend,” “is/are likely to,” “may,” “ongoing,” “plan,” “potential,” “target,” “will,” and similar statements. Among other things, statements that are not historical facts, including statements about GDS Holdings’ beliefs and expectations regarding the Notes Offering, Delta Placement of Borrowed ADSs and the Primary ADSs Offering, the growth of its businesses and its revenue for the full fiscal year, the business outlook and quotations from management in this announcement, as well as GDS Holdings’ strategic and operational plans, are or contain forward-looking statements. GDS Holdings may also make written or oral forward-looking statements in its periodic reports to the SEC on Forms 20-F and 6-K, in its current, interim and annual reports to shareholders, in announcements, circulars or other publications made on the website of the Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”), in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause GDS Holdings’ actual results or financial performance to differ materially from those contained in any forward-looking statement, including but not limited to the following: GDS Holdings’ goals and strategies; GDS Holdings’ future business development, financial condition and results of operations; the expected growth of the market for high-performance data centers, data center solutions and related services in China and regions in which GDS’ major equity investees operate, such as South East Asia; GDS Holdings’ expectations regarding demand for and market acceptance of its high-performance data centers, data center solutions and related services; GDS Holdings’ expectations regarding building, strengthening and maintaining its relationships with new and existing customers; the results of operations, growth prospects, financial condition, regulatory environment, competitive landscape and other uncertainties associated with the business and operations of our significant equity investee DayOne; the continued adoption of cloud computing and cloud service providers in China and other major markets that may impact the results of our equity investees, such as South East Asia; risks and uncertainties associated with increased investments in GDS Holdings’ business and new data center initiatives; risks and uncertainties associated with strategic acquisitions and investments; GDS Holdings’ ability to maintain or grow its revenue or business; fluctuations in GDS Holdings’ operating results; changes in laws, regulations and regulatory environment that affect GDS Holdings’ business operations and those of its major equity investees; competition in GDS Holdings’ industry in China and in markets that affect the business of our major equity investees, such as South East Asia; security breaches; power outages; and fluctuations in general economic and business conditions in China and globally, and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks, uncertainties or factors is included in GDS Holdings’ filings with the SEC, including its annual report on Form 20-F, and with the Hong Kong Stock Exchange. All information provided in this press release is as of the date of this press release and are based on assumptions that GDS Holdings believes to be reasonable as of such date, and GDS Holdings does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
For investor and media inquiries, please contact:
GDS Holdings Limited
Laura Chen
Phone: +86 (21) 2029-2203
Email: ir@gds-services.com
Piacente Financial Communications
Ross Warner
Phone: +86 (10) 6508-0677
Email: GDS@tpg-ir.com
Brandi Piacente
Phone: +1 (212) 481-2050
Email: GDS@tpg-ir.com
GDS Holdings Limited
FAQ
What is the size of GDS Holdings' convertible notes offering in 2025?
When will GDS Holdings' 2025 convertible notes mature?
How does GDS plan to use the proceeds from its 2025 convertible notes offering?
What are the conversion terms for GDS Holdings' 2025 convertible notes?
What concurrent offerings did GDS announce with its 2025 convertible notes?
