(Yicai) Aug. 21 -- China has released a draft version of new merger and acquisition loans regulations, extending their scope to include equity acquisitions and optimizing conditions.

The new draft regulations, which are open for public opinion solicitation until Sept. 20, introduce a new M&A category in addition to takeover acquisitions, which is equity acquisitions, according to a statement issued by the National Financial Regulatory Administration yesterday.

Commercial banks will be able to lend up to 60 percent of transaction values for acquisitions involving minority stakes in companies, with maximum loan repayment periods of seven years.

Equity acquisitions refer to transactions involving at least 20 percent of a company at one time. If the buyer already holds a 20 percent stake in the target, the transaction should involve no less than 5 percent.

The new draft also eased the requirements on takeover acquisition loans. In fact, commercial banks will be allowed to lend up to 70 percent of transaction values for purchases involving controlling stakes in companies, up from 60 percent. Moreover, the maximum loan repayment period was extended to 10 years from seven years.

For lenders, the draft rules stipulate that they must have at least CNY50 billion (USD7 billion) or CNY100 billion (USD13.9 billion) in consolidated assets to provide takeover acquisition loans or equity acquisition loans, respectively.

In terms of risk control, the total exposure of banks’ takeover or equity acquisition loans must not exceed 50 percent or 30 percent of their Tier 1 capital, respectively. The exposure limit for a single borrower is capped at 5 percent.

In March, the NFRA announced it had launched a pilot program relaxing rules on M&A loans for technology enterprises in 18 cities, including raising the maximum loan-to-value ratio to 80 percent from 60 percent and the maximum loan term to 10 years from seven years.

A total of 3,531 M&A transactions were completed in China in the first half of the year, down 3.9 percent from a year earlier, according to data from Wind Information. However, the transaction value rose 1.9 percent to about CNY798.3 billion (USD111.3 billion) in the period.

Editor: Futura Costaglione