(Yicai Global) Sept.13 -- Refinancing options focused on directional add-issuance have been restrained so far this year, while other means of convertible bonds, exchangeable bonds and allotment of shares have been gradually developed.
China Securities Regulatory Commission (CSRC) has adjusted the method of subscription for convertible bonds and exchangeable bonds, greatly reducing the influence of subscriptions on funds, which could accelerate convertible bond issuance going forward.
The CSRC also changed the existing subscription means for funds related to credit subscriptions, and accordingly amended partial clauses in the Measures for the Administration of the Offering and Underwriting of Securities following a public review.
The credit subscription means that participating investors do need to pay subscription funds in advance when applying. Payment is then made according to the actual amount placed. It is widely believed that issuance of convertible bonds and exchangeable bonds does not result in the freezing of large-scale funds if the prepayment subscription is eliminated on the monetary and bond markets.
Once the requirements for subscribed funds are lowered, investors can actively subscribe. The success rate and discounted new yield of convertible bonds will be further reduced through the new regulations.
“The pricing of convertible bonds will be more reasonable because it is related to the market stock, which saw decreasing market scale in the second half of 2015,” an Yicai Global analyst said. At that time, the price of convertible bonds was relatively high due to a lack of them. With the increase of convertible bonds on the market, the price will become more reasonable.”
Credit subscription is regarded as the final barrier for the large-scale issuance of convertible bonds. The previous method had a significant influence on market funds, and regulations strictly controlled the fluidity of issuing the bonds. With the new regulations officially in place, the convertible bonds may see larger quantities from September onwards. As of Sept. 11, the scale of convertible bonds to be issued has reached up to CNY305.9 billion (USD47 billion).