Convertible corporate bonds refer to bonds that can be converted into company shares according to agreed terms. As a derivative financial product with multiple investment characteristics of bonds, stocks and options, convertible corporate bonds have become a very important direct financing tool for western enterprises. At present, the global convertible corporate bond market has exceeded $654.38+050 billion, occupying an important position in the international capital market.

In China, convertible corporate bonds, as a new type of financial product in China's capital market, have been more and more accepted by the regulatory authorities and listed companies as a new type of financing and investment, from the pilot in the early 1990s to the promulgation of 1997 Interim Measures for the Administration of Convertible Corporate Bonds, and even the official promulgation of 200 1 Administrative Measures for the Issuance of Convertible Corporate Bonds by Listed Companies. The issue of convertible corporate bonds by listed companies will soon become a new hot spot in China stock market. 200 1, many listed companies have put forward the issuance plan of convertible bonds. Convertible corporate bonds have the characteristics of bonds, stocks and options.

1. Background and process of implementing convertible corporate bonds

In 1990s, with the reform of China's economic system and the development of the securities market, China's economy showed the following characteristics: the interest rate level gradually decreased, and the volatility of the stock market increased; Enterprise reorganization and asset reorganization have become important national economic policies; Interest rate fluctuation trend and the increase of stock financing cost; The proportion of equity financing in China enterprises is too high, which is not conducive to the integrity and diversification of the capital market.

In this economic situation, convertible corporate bonds, with their multiplicity of nature and flexibility of operation, avoid the troubles encountered by other financing tools, such as interest rate setting, price positioning, financing costs and so on. Convertible corporate bonds meet the needs of China's current economic development and can effectively adjust the asset structure of enterprises, which is inevitable for China to vigorously promote the pilot of convertible bonds.

In the early 1990s, Chinese enterprises began to try to use convertible corporate bonds to seek financing channels with more reasonable cost and better service for their future listing. Shenzhen Baoan, China Textile Machinery and Shennanpo have successively issued convertible corporate bonds in domestic and foreign markets, which has accumulated valuable experience for exploring and developing China's convertible bond market. In 2000, China's convertible bonds made a major breakthrough, and listed companies Hongqiao Airport and Angang New Rolling successively issued convertible corporate bonds, making convertible corporate bonds an important choice for listed companies to raise funds.

2. Advantages of convertible corporate bonds

For listed companies with large scale, low debt ratio, small proportion of circulating shares, stable operation and certain growth, convertible bond financing can raise more funds at lower cost than allotment and issuance. Specifically, its advantages are embodied in the following aspects:

It is suitable for the financing needs of large amounts of funds and relieves the dilution of existing equity.

The conversion price of convertible bonds is obviously higher than the rights issue price and the additional share price. At present, among the domestic projects involving equity financing of listed companies, only the conversion price of convertible bonds is clearly stipulated to be higher than the original circulating A-share price, and the premium rate is between 5-20% according to international practice; When a listed company adopts allotment financing, the allotment price can only be 60-80% of the original price. When issuing new shares, the share price of the newly issued shares is close to that of the original A shares, but most of them are still about 90% of the original A shares. Convertible corporate bonds are issued at a premium, which reduces the dilution of equity by the funds raised by issuing new shares and allotment. Therefore, in the case of equal issuance, the amount of funds raised by converting corporate bonds is more.

Reduce financing costs. The interest rate of convertible bonds is generally lower than that of bank deposits and ordinary corporate bonds. Taking the issuance of 654.38 billion convertible bonds as an example, the annual interest payment is more than 25 million yuan less than the issuance of corporate bonds and nearly 47 million yuan less than bank loans, and the gap is very obvious.

Get a long-term stable stock price. When the timing of equity financing is bad, issuing convertible bonds can avoid further depressing the market price of the company's shares. At the same time, the conversion period of convertible bonds is long, and the adverse impact on the company's stock price will not be as obvious or severe as that of issuing new shares and allotment.

Get a long-term and stable supply of funds. After the convertible corporate bonds are converted into shares, the debts disappear or decrease, the equity capital increases, and the fixed debt repayment principal is converted into permanent capital investment, which reduces the debt ratio of the company and obviously reduces the after-tax cash flow of the company. Therefore, convertible bonds can provide long-term and stable capital supply for issuing companies.

Improve the ownership structure and debt structure, and extend the effective period of debt. Convertible corporate bonds have the dual characteristics of bonds and stocks. Before the conversion, it constitutes the company's liabilities and after the conversion, it becomes the company's capital. Therefore, they become the supervisors of the company's equity ratio and debt ratio. If the controlling shareholder of the company holds too much shares, it can raise funds to buy back the shares by issuing convertible bonds to improve the earnings per share. If the company's debt ratio is too large and there are too many short-term debts, it can replace the short-term debts by issuing convertible bonds and postpone the company's debt repayment period.