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BIZCHINA / Center
Listed companies allowed to issue corporate bonds
By Shangguan Zhoudong (chinadaily.com.cn)
Updated: 2007-08-15 11:52
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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 today.
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 equal to at least one year's interest 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.
Statistics from listed companies and sponsors show that three kinds of
companies, public facilities such as electricity power and
transportation, real estate developers, and high-performance small- and
medium-sized companies, are more interested in corporate bond issuance.
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 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.
(For more biz stories, please visit Industry Updates)
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