Since the end of last year, reduction of bond nominal value has been adopted for the business of repayment on installments for the bonds listed on the Shanghai Stock Exchange (SSE) according to the new rule. On October 18, 2013, the “SSE Trading Rules” (amended in 2013) issued by the SSE stipulated that reduction of bond nominal value should be mainly adopted for bond repayment on installments, and reduction of bond positions or other ways could be adopted according to market conditions. Reduction of bond nominal value for the business of bond repayment on installments is conducive to improving the efficiency of the business. When bond issuers repay on installments, the bond positions held in the investors’ accounts will remain unchanged, with the nominal value of one lot of bonds reduced correspondingly. Besides, payable bond interests should be calculated according to the adjusted bond nominal value. Opening reference price after repayment on installments = closing price before the day for repayment on installments – 100 * the ratio to be repaid this time.
According to the new rule, if reduction of bond nominal value is adopted for bond repayment on installments, no trading suspension of bonds should be implemented in the process of repayment on installments, and bond trading should not be suspended on the right and interest record day, which will contribute to enhancing liquidity of bonds. According to the “Notice of Relevant Issues of Handling the Business of Bond Repayment on Installments through the SSE Trading System” released in 2012, if reduction of bond positions is still adopted for bond repayment on installments, trading should be suspended on the right and interest record day of repayment on installments.
It is learnt that on March 9, 2014, 2009 Corporate Bond of Changchun City Development Group Co., Ltd. (09 Changchun City Development) listed on the SSE became the first bond that adopted reduction of bond nominal value for repayment on installments since implementation of the new rule. Besides, the bond nominal value, opening reference price, bond name’s abbreviation, and others of 09 Changchun City Development were accordingly adjusted, with the trading not suspended on the right and interest record day. In the near future, 2009 Corporate Bond of Zhenjiang Urban Construction Investment Co., 2010 Corporate Bond of Luohe City Construction & Investment Co., 2009 Corporate Bond of Kunshan Chuangye Holding Co., Ltd., and others will also adopt reduction of bond nominal value for repayment on installments.
In addition, bond repayment on installments involves interests of issuers and investors. It is known that due to the change in the business of bond repayment on installments, the SSE previously issued a notice to require that efforts should be made to carry out risk alert and education for investors in several aspects. That is, the SSE’s members should issue risk alert for investors, and bond issuers should publish the “Announcement on Bond Repayment on Installments” on time. Furthermore, relevant issuers and underwriters should learn the relevant stipulations of the SSE, and understand the change in the business of bond repayment on installments, and do well in relevant work items.
