On March 11, the first batch of two credit protection contract businesses for corporate bonds for epidemic prevention and control were successfully launched on SZSE. They are the credit protection contract introduced by Soochow Securities and the private corporate bonds financing support instrument jointly rolled out by CITIC Securities and China Securities Finance Corporation Limited (“CSF”). Both are having the corporate bonds for epidemic prevention and control as underlying assets. The combination of the two instruments has further broadened the financing channels of the capital market to support epidemic prevention and control and work and production resumption, and has reduced related financing cost of enterprises.
Soochow Securities underwrote Green Innovation and Venture Bonds of Jiangsu Canlon Co., Ltd. (for Epidemic Prevention and Control) and provided credit protection. It was the first corporate bond for epidemic prevention and control for which SZSE has introduced a credit protection contract. The bond issuer is Jiangsu Canlon Building Materials Co., Ltd. (“Canlon”), and the issuing scale is RMB50 million, with a coupon rate of 5%. Soochow Securities provided full credit protection for the bond by selling it to investors. 30% of the funds raised will be used for work and production resumption of Huanggang Canlon New Materials Co., Ltd, a subsidiary of Canlon in Hubei Province severely affected by the epidemic, and 70% will be used for developing and upgrading the green project of a world-leading new waterproof material production line. During the bond issuance, Soochow Securities furnished enterprises with an integrated financing solution featuring “bond + credit production contract” in a market-oriented approach, improving investors’ willingness of subscription and lowering financing cost of enterprises. Thanks to the subsidies offered by Department of Finance of Jiangsu Province, Suzhou Municipal Government and Suzhou Wujiang District Government, the annualized comprehensive financing cost of the bond was as low as about 1%, which met enterprises’ pressing need for low-cost funds during the epidemic so that they can resume work and production as early as possible.
CITIC Securities worked with CSF to prepare the first private corporate bonds financing support instrument on SZSE with corporate bonds for epidemic prevention and control as the underlying assets. The reference entity was Hengyi Petrochemicals Co., Ltd. and the reference obligation was the 2020 Corporate Bonds of Hengyi Petrochemicals Co., Ltd. (Epidemic Prevention and Control Bond) (1st Tranche) underwritten by CITIC Securities, with issuing scale of RMB1 billion. The raised funds will partly be used to replenish the working capital related to raw materials of masks, protective suits, disinfection supplies and other anti-epidemic supplies. The issuance of private corporate bonds financing support instrument and corporate bonds for epidemic prevention and control has further boosted the confidence of investment and financing entities in the bond market of SZSE.
The relevant responsible person of SZSE noted that, since the initiation of epidemic prevention and control, SZSE has fully followed the arrangements of China Securities Regulatory Commission, and supported the issuance of 22 fixed-income products for epidemic prevention and control in total with financing over RMB23 billion, covering enterprises of different types, sizes and areas. The debut of the credit protection contracts with corporate bonds for epidemic prevention and control as the underlying assets is another beneficial and creative move of the capital market backing up the epidemic prevention and control. SZSE will work more closely with various market players to give full play to the direct financing for epidemic prevention and control and work and production resumption, with a view to achieving better economic and social benefits.
