Chinese language - Corporate bond issuance may hit 100b yuan this year

BIZCHINA / Center

Corporate bond issuance may hit 100b yuan this year

By Dai Yan (chinadaily.com.cn)
Updated: 2007-06-25 15:57

China may experiment with corporate bond issuance in 10-20 blue chip
companies this year, which are expected to issue 50-100 billion yuan
(US$6.6-13 billion) in total, according to China International Capital Co
Ltd (CICC).

Supposing the China Securities Regulatory Commission (CSRC) only
considers the corporate bond issuers each with net assets of over 1.5
billion yuan, eligible A-share and H-share issuers will have combined net
assets of 9.3 trillion yuan, said CICC's Fixed Income Department in a
report. The upper limit of total issuance will reach 3.2 trillion yuan
theoretically, if these companies invest up to 40 percent of their net
assets.

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"CSRC may pick issuers from the listed companies on the Shanghai and
Shenzhen 300 Index, and the upper limit of issuance will drop to 862.2
billion yuan, with an average of 2.87 billion yuan each," said the
report. "If CSRC only counts in largest blue chip companies to issue
bonds, only 10-20 will be available this year with a possible combined
issuance volume of 50-100 billion yuan."

According to draft rules on corporate bond issuance published by CSRC,
the total value of a company's outstanding bonds is required not to
exceed 40 percent of its net assets, and the company's average annual
distributable profits in the latest three accounting years should not be
less than the bonds' one-year interest.

Requirements for corporate bond issuance are much looser than those of
enterprise bonds and convertible bonds, and most of the listed companies
could meet the criteria, noted the CICC report.

Durations of corporate bond issuance may be set between three to seven
years, while that of enterprise bonds are usually 10 years or above.
Corporate bond issuers may focus on short-term bonds to reduce costs and
avoid direct competition with enterprise bonds, according to CICC.

The draft rules did not specify where corporate bonds should be listed.
"It is possible for corporate bonds to be listed in the interbank
market," said Xu Xiaoqing, an analyst with CICC's Fixed Income Department.

(For more biz stories, please visit Industry Updates)

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