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Published on 2018-11-01 21:26:15 Share it web version
                                    The CSRC pilots the transfer of convertible bonds to support the development of listed companies
Source: SFC website

In recent years, I will continue to promote the market-oriented reform of mergers and acquisitions, and actively support various types of enterprises such as state-owned holdings and private holdings to grow and develop through capital market mergers and acquisitions. In March 2014, the State Council issued the “Opinions on Further Optimizing the Merger and Reorganization of the Market Environment” (Guo Fa [2014] No. 14), clarifying that “allowing qualified enterprises to issue preferred shares and issue convertible bonds as merger and reorganization payment methods” ". In order to implement the State Council's deployment, in June 2014, I will amend and issue the “Administrative Measures for Major Asset Restructuring of Listed Companies”, which stipulates that listed companies can issue convertible bonds to specific targets for the purchase of assets or merger with other companies.

The listed company's targeted issuance of convertible bonds as a payment instrument in mergers and acquisitions is conducive to increasing the flexibility of M&A transaction negotiations and providing a more flexible interest game mechanism for transactions, which is beneficial to effectively alleviate the cash pressure of listed companies and the risk of dilution of major shareholders' equity. Mergers and acquisitions restructuring financing channels. Recently, in light of market conditions, a number of listed companies have actively studied the introduction of targeted convertible bonds during mergers and acquisitions, and some companies have proposed practical solutions. In light of the specific conditions of the company, I will actively promote the pilot of the transferable debts as a payment and reorganization transaction payment instrument, and support all types of enterprises including privately-held listed companies to become better and stronger through mergers and acquisitions.

In the next step, I will continue to play the role of the market mechanism, continue to research and adapt to the demands of market entities, create conditions to support all types of enterprises to optimize resource allocation through mergers and acquisitions, and achieve high-quality development.

  【Related reports】

  Banking industry "hungry and thirsty" 100 billion convertible bonds pending

Under strict supervision, the banking industry is facing greater capital replenishment pressure, so the “blood-filling” action is frequent. Data show that as of October 19, A-share listed banks also have CITIC Bank (40 billion yuan), Jiangsu Bank (20 billion yuan), Ping An Bank (26 billion yuan), and Shanghai Pudong Development Bank (50 billion yuan) convertible bonds plan. Awaiting approval by the China Securities Regulatory Commission, the total issuance of pending is about 136 billion yuan. However, in the banks that completed the issuance of convertible bonds this year, many banks frequently revised down the conversion price, but the investor's willingness to convert shares is still not high, and the conversion rate is low.

  100 billion convertible bonds to be approved

On October 16, the Bank of Communications issued a notice stating that the bank's public offering of A-share convertible corporate bonds of not more than 60 billion yuan has been approved by the Banking Regulatory Commission and will be included in the core Tier 1 capital after the conversion.

According to the 2018 mid-year report, the capital adequacy ratio of Bank of Communications is 13.86%, the tier 1 capital adequacy ratio is 11.69%, and the core tier 1 capital adequacy ratio is 10.63%, down 0.14 percentage points, 0.17 percentage points and 0.16 percentage points respectively from the end of the previous year. .

In fact, in the context of increasing regulatory efforts, compliance with regulatory trends, how to meet the regulatory requirements for capital adequacy ratios, and further consolidation of the capital base have become strategic issues that domestic commercial banks must consider and resolve. The IPO, fixed-income, and convertible bonds after conversion are an important way for commercial banks to supplement core Tier 1 capital.

A banking analyst believes that for banks, the cost of convertible bonds is relatively low, and the choice is relatively large. “In general, the interest on convertible bonds is relatively low, and it can also reduce the dilution of the company’s equity by the expansion of equity. In addition, the issuance of convertible bonds does not require a credit rating and saves various costs. The issuing bank can also Forced conversion when there are favorable conditions, and convert the debt to equity," the source said.

The reporter found that this year, China CITIC Bank, Jiangsu Bank, Ping An Bank and other listed banks have disclosed the convertible bond issuance plan, which is intended to supplement capital through it.

The data shows that in addition to the RMB 2.5 billion convertible bond issuance application approved by the China Securities Regulatory Commission and the RMB 60 billion convertible bond approved by the China Securities Regulatory Commission on October 16, the A-share listed bank also has CITIC Bank (40 billion). Yuan), Jiangsu Bank (20 billion yuan), Ping An Bank (26 billion yuan), and Shanghai Pudong Development Bank (50 billion yuan) convertible bonds plan are subject to approval by the China Securities Regulatory Commission. The total issuance of pending is about 136 billion yuan.

  Investors vote with their feetConversion price has been lowered several times

Generally speaking, the initial conversion price of the convertible bonds is not less than the 30 trading days before the announcement of the prospectus, the average price of the A shares of the company and the trading of the A shares in the previous trading day. Price, as well as the latest audited net assets per share and stock face value.

After the issuance of convertible bonds, the company may, as the case may be, due to the distribution of stock dividends, the transfer of share capital, the issuance of new shares or the allotment of shares, the change of shares of the company and the distribution of cash dividends, or the repurchase, merger, and separation of shares, etc. Adjust the price of the conversion.

At the same time, during the period of the convertible bonds, when the closing price of A shares of common stocks on 15 consecutive trading days is less than 80% of the current conversion price, the company can also propose to convert shares. The price is revised downwards and submitted to the general meeting of shareholders for consideration and voting.

The reporter noted that many banks have lowered the price of the conversion. Wuxi Bank issued RMB 3 billion convertible bonds in January this year, and can convert shares from August 6th. The initial conversion price is 8.9 yuan/share. But the bank quickly revised the price down twice, eventually 6.7 yuan / share. As of October 19, the data showed that Wuxi Bank's latest closing price was 4.97 yuan / share, compared with its initial conversion price of about 44%. Changshu Bank issued 3 billion yuan of convertible bonds in February this year, and can convert shares from July 26, the initial conversion price is 7.61 yuan / share, followed by two downward revisions to 5.76 yuan / share. As of October 19, Changshu Bank's closing price was 5.68 yuan / share, which is about 25% less than the initial conversion price. Jiangyin Bank revised the price three times, from the initial price of 9.16 yuan / share, down to 5.67 yuan / share. As of October 19, Jiangyin Bank's closing price was 4.86 yuan / share, about 47% less than the initial conversion price. (Source: Investment Express)

(Article source: SFC website)

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