China-based electric vehicle (EV) maker Nio Ltd. (NYSE: NIO) announced pricing early Wednesday morning for its $1.5 billion offering of convertible senior notes. The debt offering was announced on Tuesday.

The notes will be issued in two tranches, one due in 2026 and one due in 2027. Each tranche is valued at $650 million. The notes are senior, unsecured obligations of the company and may be exchanged for Nio’s American depositary shares (ADSs). Each ADS is equal to one share of Nio’s Class A common stock.

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The conversion rate on both tranches is 10.7458 Nio ADSs per $1,000 of principal. At Tuesday’s closing price of $62.04 per ADS, the initial conversion price is $93.06 representing a conversion premium on the notes of 50%.

That rich premium comes at a price, however. The 2026 notes will bear no interest, while the 2027 notes will pay an interest rate of 0.5% annually. The notes are convertible with restrictions before August 1, 2025, (or August 1, 2026,) and with no restrictions thereafter. Nio is required to repurchase the notes at their full purchase price in cash on February 1, 2024, “in the event of certain fundamental changes.”

Demand for Nio’s surging shares has made it possible for the company to issue this no-interest debt. Less than a year ago, Nio sold $750 million in senior unsecured debt with a coupon of 4.5% when the company’s shares were trading at around $7.50 each.

Nio’s recently launched ET7 premium sedan is not scheduled to begin deliveries to customers until next year. The new sedan includes the company’s first fully automated driving system, along with a 150-kilowatt-hour battery that is estimated to give the car a range of more than 600 miles.

Just last month, Nio raised more than $3 billion in a follow-on offering of some 68 million ADSs priced at $41.98. That followed an August offering of 88.5 million ADSs at $17.00 a share that raised $1.5 billion in net proceeds. The company also raised $1.5 billion in net proceeds from an August offering of 88.5 million ADSs at $17.00 per share.

The underwriters of the offering (Credit Suisse, Goldman Sachs, Morgan Stanley and China International Capital) have a 30-day option for an additional $100 million on each tranche.

Nio’s shares traded up about 2.8% early Wednesday, at $63.67 in a 52-week range of $2.11 to $66.99. The consensus price target is $44.44, nearly $2 per ADS lower than it was on Tuesday following a downgrade to Neutral from Citigroup analysts.

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