Hey remember this every one .Zip Co founders Peter Gray and...

Hey remember this every one .

Zip Co founders Peter Gray and Larry Diamond.

Street Talk can reveal Zip is seeking to raise $400 million via the sale of seven year notes that would yield 1.75 per cent to 2.25 per cent a year.

According to terms sent to potential investors, the zero coupon notes would be issued at 100 per cent of their value and redeemed at 112.97 to 116.96 per cent at maturity, depending on the yield set at the bookbuild.

The notes were offered with a 32.5 per cent to 42.5 per cent conversion premium, and also included an investor put date in four years.

The redemption price at the put date was 107.22 per cent to 109.36 per cent.

The brokers were seeking to close the books by Thursday morning.

Zip’s expected to use capital raised to help fund growth. Street Talk revealed the raising earlier on Wednesday.

Wednesday night’s launch came after Zip and its bankers, Bank of America and Jarden, spent the afternoon pitching the company and its balance sheet credentials to offshore institutional investors.

While Australian fund managers and retail punters have traded the stock like crazy for the past few years, offshore credit funds have had little reason to think about Zip and its credit risk.

Bankers reckon the buy now, pay later outfit is the perfect candidate for a convertible notes deal. It has a blue sky-type growth story to ensure the notes can be issued at a substantial premium, the volatility required to keep hedge funds interested and the convertible notes liquid, and huge volume of trading in its headstock.

Such a combination makes it easier for convertible investors to assess the bond’s option value, and ensures there should be ample of time for sharp-nosed funds to trade in and out during the ensuing five or so years.

It was interesting to see Jarden pop up on the ticket. The Kiwi investment bank has a new Australian investment banking team but little presence in Asia, where convertible bonds are typically sold.

Bank of America has become Zip’s house adviser. It arranged a convertible notes issue for Zip last year, when it helped place $200 million of notes with US based Heights Capital Management, which is part of Susquehanna International Group. That deal funded Zip’s stake in US business QuadPay.