Bond Underwriting
1. Debt financing tools for non-financial businesses
*Product Definition
Debt financing tools for non-financial businesses are securities issued by non-financial business with legal personality in the inter-bank bond market and agreed to be repaid with principal and interest within a fixed period.
*Product Types
Debt financing tools for non-financial businesses underwritten by the Bank include: short-term financing bonds, medium-term notes, non-public directional debt financing tool, super short-term financing bonds, assets-backed notes, project revenue notes, SME collection notes etc.
*Service Advantages
The debt financing tools for non-financial businesses of the Bank has been developed at a rate higher than the average growth rate in the market. From 2011 to 2013, the compound annual growth rate (CAGR) of the Bank’s bonds underwriting business reached 48%, higher than the CAGR of 24% for total market volume in the same period. In 2013, the underwriting and issuance size of the Bank’s debt financing tools for non-financial businesses reached RMB 241.249 billion Yuan, thus leading the market in terms of underwriting and issuance amount and number of issuers.
Particularly, in respect of directional tools underwriting which directly reflects the pricing and marketing capacity of lead underwriter, the Bank was among the first group in the market for two consecutive years (2012-2013) in terms of issuance size , number of issuers and issuance number of bonds, wining favorable reception from both the issuers and investors.
*Applicable Scope
Based on the requirements from National Association of Financial Market Institutional Investors (NAFMII), there are no restrictions on the registration and issuance of debt financing tools for enterprises. As one of the direct financing tools, debt financing tools enable enterprises to expand financing channels and to lower the financing cost.
(1) Short-term Financing Bonds
*Product Definition
Short-term financing bonds are debt financing tools issued by non-financial business with legal personality in the inter-bank bond market and agreed to be repaid with principal and interest within 1 year. The balance outstanding shall not exceed 40% of the issuer’s net assets, and funds thus raised shall be put into production and operation subject to national laws, regulations and policies.
*Product Features
(1) Market-oriented pricing, and issuers with higher credit rating will enjoy financing cost lower than the benchmark interest rate for loan of the same term;
(2) Flexible use of funds, including repayment of bank loan, supplement to operating funds etc;
(3) Efficient financing, with one-time registration (valid within 2 years) and issuance by stages;
(4) Simple procedure for issuance without guarantee. The issuer may determine the timing of issuance according to its own capital needs within the 2 year term of validity and registered amount.
(2) Medium-term Notes
*Product Definition
Medium-term notes are debt financing tools issued by non-financial business with legal personality in the inter-bank bond market as planned and agreed to be repaid with principal and interest within a fixed period. The balance outstanding shall not exceed 40% of the issuer's net assets, and funds thus raised shall be put into production and operation subject to national laws, regulations and policies.
*Product Features
(1) Longer term of issuance (3-5 years generally), and the funds raised could be put into project construction;
(2) Flexible, with one-time registration and issuance at one-time or by stages, without collateral or guarantee;
(3) For issuers with sound qualification, the financing cost is favorable than the benchmark interest rate for loan of the same term;
(4) Subject to certain conditions, long term option-embedded medium term notes may be included as equities, thus helping the issuer to improve structure of balance and liabilities and financial indicators.
(3) Non-public Directional Debt Financing Tools
*Product Definition
Non-public directional debt financing tools are debt financing tools issued by non-financial business with legal personality to institutional investors in the inter-bank market and could be circulated and transferred among directional investors.
*Product Features
(1) Less information disclosed in public market;
(2) The restriction on 40% of net assets does not apply;
(3) Enjoy certain liquidity premium over above-mentioned debt financing tools.
(4) Super Short-term Financing Bonds
*Product Definition
Super short-term financing bonds are short-term financing bonds of less than 270 days issued by non-financial business with legal personality and high credit rating in the inter-bank bond market. The funds thus raised shall be used to satisfy working capital subject to national laws, regulations and policies, and not allowed to be used in long term investment.
*Product Features
(1) One-time registration (valid within 2 years) and issuance by stages;
(2) Quick, convenient and efficient issuance;
(3) The restriction on 40% of net assets does not apply;
(4) The period of issuance must not exceed 270 days.
(5) Assets-backed Notes
*Product Definition
Assets-backed notes of non-financial business are debt financing tools issued by non-financial business in the inter-bank bond market, backed by cash flow generated by underlying assets and agreed to be repaid with principal and interest within a fixed period.
*Product Features
(1) No strict requirements on the qualification of issuer;
(2) The period of issuance depends on the cash flow from underlying assets of issuer;
(3) Flexible, could be issued in pubic or non-public way;
(4) Repayment capital stem from cash flow of underlying assets.
(6) Project Revenue Notes
*Product Definition
Project revenue notes of non-financial business are debt financing tools issued by non-financial business in the inter-bank bond market, and the funds thus raised shall be used in project construction and operational cash flow from the project becomes the major source of repayment funds.
*Product Features
(1) Issuers are usually companies with projects;
(2) The period of issuance may cover the whole investment cycle of projects;
(3) Funds for repayment come from project revenue, and local governments bear no debt liabilities directly.
(7) SME Collection Notes
*Product Definition
SME collection notes are debt financing tools issued by 2-10 enterprises with legal personality in the inter-bank bond market with unified products design, unified notes title, unified credit increment and unified issuance and registration method, and agreed to be repaid with principal and interest within a fixed period. The balance outstanding of any particular issuer shall not exceed 40% of its net assets. The funds raised under collective notes for a particular issuer shall not exceed RMB 200 million Yuan, and the registered amount of single collective notes shall not exceed RMB 1 billion Yuan. The funds thus raised shall be put into production and operation subject to national laws, regulations and policies. The issuer shall disclose the specific use of funds in issuance documents.
*Product Features
(1) Relatively low requirements to the qualification of issuers (lawfully SMEs generally);
(2) One-time registration, one-time issuance;
(3) The period of issuance can be extended to 3 years to enlarge financing channels for SMEs;
(4) Market oriented nominal interest rate, and credit increment may lower financing cost for issuers.
2. Wealth Management-based Direct Financing Tools
*Product Definition
Wealth management-based direct financing tools are standard investment vehicles initiated by commercial banks as initial manager, with direct financing for single enterprises as investment direction, registered and escrowed at designated depository and clearing institutions, traded publicly among qualified investors and disclosed at designated channels.
*Product Features
(1) Connecting wealth management funds and wealth management tools, shorten financing chain and broaden financing channel for issuers;
(2) Mainly initiated by credit.
*Service Advantages
Since the introduction in 2013, the Bank has made great effort to promote the business, and has achieved leading positions in terms of size and number. The Bank channels wealth management funds more into the real economy, and strictly enforce the requirements for market access for enterprises with excessive production capacity and contradicting to sector policies, thus furthering our advantages as a Equator Bank, and strengthen the ability to serve customers.
*Applicable Scope
(1) Mainly suitable for medium rating enterprises that comply with national industrial policies;
(2) The major purpose of such tools is to meet the short and medium term financing needs of abovementioned enterprises.
3. Financial Bonds Underwriting
*Product Definition
Financial bonds underwriting are financial services provided to commercial banks, securities companies, finance companies affiliated to enterprises by the Bank as lead underwriter, co-lead underwriter and financial advisor etc.
*Product Types
The financial bonds issued and underwritten by the Bank include: financial bonds of commercial banks, short-term financing bonds of securities companies, secondary capital bonds of commercial banks.
*Service Advantages
The Bank has long term cooperation with multiple investors in the inter-bank bond market, strong marketing capacity and expertise and abundant experience in underwriting in the inter-bank bond market. The Bank has successfully issued several financial bond financing tools for various financial institutions, including financial bonds, short-term financing bonds of securities companies and subordinated bonds of commercial banks.
*Applicable Scope
Customers in need of financial bond financing.
(1) Financial Bonds of Commercial Banks
*Product Definition
Financial bonds are securities issued by financial institutions, in accordance with the Measures for the Administration of the Issuance of Financial Bonds in the National Inter-bank Bond Market, in the national inter-bank market and agreed to be repaid with principal and interest. The issuers include policy banks, commercial banks, finance companies affiliated to enterprises and other financial institutions. Financial bonds of commercial banks are securities issued by commercial banks legally established in PRC, in the national inter-bank market and agreed to be repaid with principal and interest.
*Product Features
(1) Market-oriented pricing, and issuers with higher credit rating will enjoy financing cost lower than the benchmark interest rate for loan of the same term;
(2) Commercial banks can issue financial bonds specially for loan to small- and mini-sized enterprises to save loan-to-deposit ratio and achieve favorable risk weight, or general financial bonds from which the funds raised are of wide use;
(3) Efficient financing, one-time registration, multiple issuance;
(4) Benefit issuers in improving assets-liabilities management, broaden direct financing channel and optimize the structure of financial assets.
(2) Short-term Financing Bonds of Security Company
*Product Definition
Short-term financing bonds of securities companies are financial bonds issued by securities companies, in accordance with Measures for Administration of Short-term Financing Bonds of Securities Companies, for the purpose of short-term financing, by way of invitation for bids or book-building in the inter-bank bond market, and agreed to be repaid with principal and interest within a fixed period.
*Product Features
(1) Market-oriented pricing, and issuers with higher credit rating will enjoy financing cost lower than the benchmark interest rate for loan of the same term;
(2) Funds raised can be used for any purposes other than fixed-assets investment and outlet construction, secondary stock market investment, financing customer’s securities trading and long-term equity investment, primarily for supplementing working capital;
(3) The period of issuance is limited within 91 days, which is flexible and lowers the cost. One-time approval grants rolling issues within one year.
(3) Subordinated Bonds and Secondary Capital Bonds of Commercial Banks
*Product Definition
Subordinated bonds of commercial banks are bonds issued by commercial banks, the principal and interest of which shall be repaid prior to that of the equity capital of commercial banks but after that of other liabilities of commercial banks.Upon approval by CBRC, subordinated bonds may be included as supplementary capital.
According to the Measures on the Administration of Capital of Commercial Banks (Interim) which came into effect on Jan 1, 2013, unqualified capital tool issued after Jan 1, 2013 shall not be included as regulatory capital. The subordinated bonds with redemption provisions may be included as regulatory capital, subject to 10% decrease year on year. As a result, more and more banks choose to issue secondary capital bonds to supplement secondary capital.
The secondary capital bonds of commercial banks are bonds issued publicly by commercial banks to increase secondary capital. According to the Measures on the Administration of Capital of Commercial Banks (Interim), with write-down provisions and subordination provisions, secondary capital bonds of commercial banks are bonds issued publicly in the national inter-bank bond market by way of bidding invitation in bonds issuance system of PBC, and the funds raised are to supplement secondary capital of issuers based on applicable laws and approval of regulatory bodies.
*Product Features
(1) Market-oriented pricing, as with subordination provisions, the credit level of debts rating is relatively lower than the subject’s credit level;
(2) Funds raised shall be used specifically to supplement secondary capital of commercial banks;
(3) The period of issuance is mostly 10 or 15 years, and usually bear redemption provisions by issuers;
(4) By issuance of secondary capital bonds, commercial banks not only increase its capital adequacy ratio to satisfy the requirements of future development; but also broaden its capital supplementary channels, which is significant to optimize capital structure, increase performance and strengthen risk resistance.
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