In order to carry out The Opinion of the State Council on Further Optimizing the Market Environment for the Mergers and Acquisitions of Enterprises (The State Council Issued (2014) No.14), expand the financing channel for mergers and acquisitions activities, and give a full play to capital market’s role in supporting the real economy, Shenzhen and Shanghai stock exchanges issued Circular on Trial of Mergers and Acquisitions Private Placement Bonds Business (hereinafter referred as Circular), on the basis of successful experience of trial of SME private placement bonds.
According to Circular, merger and acquisition bonds refer to corporate bonds privately placed or transferred in China by corporate legal person, which registered within the territory of China, for the purpose of carrying out mergers and acquisitions, and with the stipulation that the principal and interest of the bond should be repaid within certain period. Comparing with SME private placement bonds, the issuing body of mergers and acquisitions bond is not confined to small-and-medium-size enterprise, and its raising fund should be used in supporting the enterprise’ mergers and acquisitions activities, which include paying the consideration of mergers and acquisitions, replacing the loan for mergers and acquisitions, etc.
As introduced by relevant principal from SZSE, the existing business framework and electronic application channel of the SME private placement bonds would be adopted for the record filing and application of mergers and acquisitions bonds. In order to strengthen the investor protection system and risk prevention, issuer of mergers and acquisitions bonds should stipulated in the prospectus the purpose and supervision system of raising fund, setting up supervising account for raising fund, hiring supervision bank; meanwhile, arrangement of investor protection systems such as the guarantee system for repaying bonds, settlement arrangement, dividend distribution policy, trusteeship management and bond holders’ meeting should be explicitly defined; in the event that situation of affecting the benefit of investors occurs, for example, the termination of mergers and acquisitions or cross default, risk prevention measures including arrangement of repaying the principal and interest in advance of time should be stipulated.
Launching mergers and acquisitions bonds is an important measure of the exchange market in supporting the enterprises to conduct mergers and acquisitions. It not only provides convenient debt financing channel for the related body of mergers and acquisitions, but also further enrich the production line of exchange private placement bonds, providing more bond investment varieties for investors. Relevant principal from SZSE indicated that SZSE would accelerate the building of innovative platform for fixed income products, actively explore the innovative varieties of private placement bonds on the basis of strengthening the risk prevention, and further promote the steady development of exchange bond market.
