Securities houses ready for bonds ( 2003-10-09 10:03) (China Daily HK Edition)
Several domestic securities
companies have handed in proposals to the securities watchdog to issue corporate
bonds, sources have said.
Guangzhou-based GF Securities and Beijing-based China Galaxy Securities are
among the first batch of applicants.
Also actively preparing for bond issues are several other major securities
houses, such as CITIC, Guotai Jun'an and Haitong.
A spokesman for GF Securities told China Daily yesterday that the company had
submitted its proposal to the China Securities Regulatory Commission (CSRC) and
is awaiting an answer.
The CSRC announced at the end of August that domestic securities companies
would be able to issue corporate bonds starting from October 8, opening up a new
financing channel for securities businesses.
The move is generally regarded as a major boost to the securities companies,
which have been facing limited financing avenues even while the bear market has
eroded their income.
Market sources said that GF is expected to issue 5-year corporate bonds worth
960 million yuan (US$116 million) with annual interest rate capped at 3.9 per
cent.
China Galaxy Securities is planning a bigger issue, possibly of 3 billion
yuan (US$362 million), with a similar interest rate and term.
CITIC Securities announced in a circular last month that it wanted to issue 2
billion yuan (US$241.5 million) of 5-year corporate bonds.
Insiders said most of the securities companies would choose to place the
bonds privately to a limited group of investors instead of floating them to
public investors.
"Private distribution of the bonds will make it much easier for the
securities companies, which have good
onal investors," said a researcher with the Development and Research Centre
of the State Council.
CSRC has drafted rules that set qualifications for the bond issuers, from
asset scale and profitability to credit record.
A securities company, for example, needs to have minimum assets of 1 billion
yuan (US$121 million) and should have made profits in the previous year. The
size of the issue cannot exceed 40 per cent of the company's net assets.
Regarding the type of bonds, they can be either sold to the general public
and listed in the bourses, or sold privately to qualified investors.
Qualified investors are institutions or bodies that have licences for
securities investment and a minimum registered capital of 10 million yuan
(US$1.2 million) or net assets of 20 million yuan (US$2.4 million).
So the potential buyers of privately-placed bonds would mainly be insurance
companies, trust and invest.
