SZSE Implemented the Reformation for the Issuance Method of Convertible Bonds and Exchangeable Bonds

date: 2017-9-12

In order to further regulate the securities issuance and underwriting behaviors and perfect the issuance method of convertible corporate bonds (hereinafter referred to as ‘convertible bonds’) and exchangeable corporate bonds (hereinafter referred to as ‘exchangeable bonds’), China Securities Regulatory Commission (‘CSRC’) revised the Measures for the Administration of Securities Issuance and Underwriting. According to the work deployment, Shenzhen Stock Exchange (‘SZSE’) recently made matching amendments to the Detailed Rules for the Implementation of Services for Convertible Corporate Bonds of Shenzhen Stock Exchange and the Business Guidelines for the Issuance and Listing of Convertible Corporate Bonds of Listed Companies of Shenzhen Stock Exchange, and formulated and promulgated the Notice on Further Regulating and Perfecting the Services for Issuance of Exchangeable Corporate Bonds of Shenzhen Stock Exchange and the Business Guidelines for the Issuance and Listing of Exchangeable Corporate Bonds of Shenzhen Stock Exchange.

 

It is known that the matching rules amended and formulated by SZSE have the features as follows:

 

Firstly, the reformation for credit subscription is promoted. Now fund subscription is adopted in the subscription for convertible bonds and exchangeable bonds, impact on the market funds is easily to be caused in the process of fund gathering and transfer. In order to eliminate the above problems and ensure the stable operation of the capital market, SZSE planned to change the subscription method for convertible bonds and exchangeable bonds from fund subscription to credit subscription, which means that fund needn’t be paid upon the subscription but after determination of the amount of shares placed.

 

Secondly, the discreditable behavior of failing in payment after the placement is restricted. As for online investors, penalty mechanism on the defaults of online credit subscription for initial publicly offered shares, convertible bonds and exchangeable bonds is established by learning from the experience in supervision of the subscription for initial publicly offered shares, which explicitly stipulates that if investors win the lot for IPO, convertible bonds or exchangeable bonds but fail to pay in a full amount for three times within 12 months, they aren’t allowed to participate in subscription for online initial publicly offered shares, convertible bonds or exchangeable bonds within 6 months from the next day of the last declaration for abandonment of their subscription. As for offline investors, lead underwriters are allowed to collect the subscription margin of no more than CNY500,000 per offline subscription account and stipulate the treatment method for subscription margin in case of any defaults occurred in issuance announcements.

 

Thirdly, relevant issuance procedures are optimized. According to the matching rules, online subscription upper limit for single amount may be reasonably set by lead underwriters according to the issuance volume, and matters regarding offline issuance may be organized and implemented by lead underwriters and listed companies, so as to offer more autonomy to lead underwriters and listed companies. Meanwhile, the placement method of public placement exchangeable bonds in online issuance is changed from the method of time priority to lottery winning (the same method with that of convertible bonds), so as to further improve the fairness. Besides, if the total amount of convertible bonds subscribed and paid by online and offline investors is less than 70% of the total issuance volume, issuers or lead underwriters may apply for termination of the issuance on the day of T+3, so as to improve the efficiency.

 

It is known that the above rules have been implemented from September 8, 2017. And SZSE has made corresponding adjustment to the technology system.

 

Relevant official of SZSE said that SZSE’s implementation of reformation for the issuance method of convertible bonds and exchangeable bonds and amendments and formulation of relevant matching rules according to the unified work deployment of CSRC, not only help maintain the stability of the monetary market and bond market and prevent from possible financial risks, but also help increase the market attractiveness of convertible bonds and exchangeable bonds, reduce financing costs and enhance the success rate of issuance for enterprises, so as to further play the role of capital market in direct financing. SZSE will continue to implement various work of reformation for the capital market, actually prevent financial risks, constantly boost the market vitality and deepen the services for the development of the real economy.