Listed companies, including those listed on the Shanghai,
Shenzhen, or overseas markets, are now allowed to issue corporate
bonds on a trial basis, according to a new rule released by the
China Securities Regulatory Commission (CSRC) yesterday, the
Shanghai Securities News reported on Wednesday.
The rule signals the official start of China's corporate bond
issuance and is important in expanding enterprises' financing
channels, improving financial market, enriching securities
investment tools, and boosting harmonious development of the
capital market.
The CSRC said potential issuers must have sound credit ratings
and their average annual distributable profits in the recent three
accounting years must be no less than one year's interests that the
company would pay on the proposed bond issue.
Furthermore, the value of outstanding bonds after the proposed
issuance should not exceed 40 percent of the company's net assets
at the end of the latest accounting year, according to the
rule.
The regulator is also planning to issue a series of auxiliary
measures covering issuance applications, prospectuses, bondholders'
meetings, and custody agreements.
It is reported that three kinds of listed companies are more
interested in corporate bond issuance. They are electricity power
and transportation companies, real estate developers, and
high-performance small- and medium-sized companies.
China Yangtze Power Co is expected to issue the first corporate
bonds with a total issuance of 8 billion yuan (US$1.06
billion).
Currently, only a handful of large State-owned enterprises
approved by the National Development and Reform Commission (NDRC)
can issue such bonds. The price and amount of bonds issued are to
be decided by the commission, and the State commercial banks are
also required to underwrite the bonds.
Just 283.1 billion yuan of corporate bonds had been issued by
the end of last year, accounting for only 1.35 percent of gross
domestic product, far lower than the 40 percent in the United
States and 17 percent in the Republic of Korea.
(Chinadaily.com.cn August 15, 2007)
