How to follow the self financing mode of structured issuance?

category:Finance
 How to follow the self financing mode of structured issuance?


Structured issue attracts more attention

At the end of the year, the funds are tight, and many urban investment investment companies often have to borrow the new to repay the old at the end of the year. The issuance of the primary market has been affected recently, and the aftermath of the Yongmei incident will last for a long time. A securities firm investment banking department said to the first financial reporter. He also mentioned that after the associations voice, institutions were more sensitive to structured issues.

This reminds the market that after the subcontracting incident at the end of May last year, the trading and issuance of inter-bank certificates of deposit of small and medium-sized banks were affected and liquidity was tight. Since June, they have rejected the pledge financing of medium and low-grade bonds from non-bank, which makes the financing of structured bond products of non-bank unable to roll forward, resulting in the collapse of some products. Since the second half of 2017, under the influence of the new regulations on asset management and thunderstorm events, many credit bonds with lower rating are difficult to be directly issued for fund-raising. Therefore, the above-mentioned structured bond issuance mode has become popular, and AA urban investment bonds are the main force among them.

The main mode of structured bond issuance is called 118 project in the industry, that is, the issuer can withdraw 1.8 times (such as 1.8 billion yuan) of financing with 1 times of capital (such as 1 billion yuan). In extreme cases. The issuer can also raise the funds needed for the self issued bonds by means of short-term borrowing and other means, and return them after the financing is completed, which can be described as a white wolf with empty hands.

In practice, the above two kinds of structured bond issuance mode can also be combined to further enlarge the leverage. The general path is that the issuers subscribe to asset management products, participate in bond issuance at the same level, and then realize the financing purpose through bond pledge repurchase; the channel mainly focuses on the directional asset management plan and fund account of securities companies, mainly the self operating department, asset management department or fund company of the securities company as the manager. Usually, the issuer gives a sum of money to the private equity institution, and the private institution finds a bridge side to subscribe, and the bond is issued After the completion of the bank, through the asset management plan or the maximum leverage ratio of the fund account, the pledge repurchase financing is used to arbitrage funds, and the bridge side exits smoothly.

For example, the enterprise intends to issue 900 million yuan of bonds, but no one is interested in the market. Therefore, the enterprise takes 500 million yuan of its own funds to subscribe for asset management plan or fund account products, and the private equity manager finds a bridge to subscribe for the remaining 400 million yuan of bonds. Then, through the asset management plan or special fund account, the RMB 500 million bonds are pledged and repurchased, and the 400 million RMB bonds are returned to the issuer. During the existence of bonds, managers need to constantly find counterparties to maintain the normal operation of asset management products through pledge repurchase until the bonds mature or sell the bonds to investors.

However, after the inter-bank business of small and medium-sized banks was affected and began to reduce leverage, the game of rolling financing could not be played any longer, which directly led to the explosion of some structured products.

It is reported that Yongmei Group and its controlling shareholder Henan energy chemical group have a total of more than 40 billion yuan of bonds, some of which involve structured issuance, and a considerable part of which are heavily held by Haitong Securities. Different from the previous style of aggressive bond private equity funds mainly engaged in structured bond issuance of private enterprises, this time mainly involved state-owned enterprise bonds.

Strengthening trust and intermediary accountability under the normalization of default

For structured issuance, there is also a view that structured financing is also a normal way of corporate financing, which is a means of issuing bonds under the condition of poor liquidity. Enterprises can buy back their own stocks, and shareholders can also pledge their shares. Why cant issuers buy back their own bonds? A securities firm investment banking department said to the first financial reporter.

However, there are also some market participants who are against it. In the past, based on the trust among institutions, the management of the qualification of counterparties and pledged bonds was generally relatively loose. Many institutions took advantage of this and used it as a channel for bond issuers to enter the interbank market, The reverse repurchase party thinks that it is the risk of the counterparties of the interbank institutions, and the result is the credit risk of the issuer. The risk of the reverse repurchase party is not fully compensated in terms of price. Through this way of issuance, the demand is inflated, leading to a false issuance interest rate in the market. The credit spread is not opened, which distorts the market price. The public price can not truly reflect the actual qualification and risk of the issuer. At this time, the leverage is amplified by pledge repurchase, which is easy to form toxic assets to spread in the same industry through the repurchase market.

As early as November 12, the association of dealers said that it was concerned about the substantial breach of contract of Yongcheng Coal after the issuance of 20 Yongmei mtn006 on October 20, 2020, and would launch a self-discipline investigation on whether the issuer and relevant intermediary agencies effectively revealed risks and fully disclosed, and whether they strictly performed relevant duties in the process of business development. At that time, many institutions told reporters that the investigation results and relevant disposal measures were the focus of follow-up market attention.

At present, a series of announcements of the association also indicate that in the future, the issuers should improve their credit obligations, especially the standardization and transparency of financial information disclosure of local governments. At the same time, we should further standardize the responsibilities and obligations of intermediaries, and should have corresponding policy provisions and constraints in terms of information disclosure, due diligence, and continuous supervision, including the associations reference to the explicit prohibition of structured bond issuance, requiring the issuer not to directly subscribe, or actually be funded by the issuer, but indirectly subscribe through affiliated institutions, asset management products, etc For the issued debt financing instruments, the issuer shall make relevant commitments in the issuance plan and confirm them in the issuance announcement. Underwriters and investors shall not intentionally assist the issuer in self financing. As the worst of the epidemic is over, the Chinese government has returned to the state-owned enterprises to reduce leverage, and there will be more cases of default. However, overall, the default rate is still very low, and there will be no systemic risk, Li Chang, an analyst in Chinas corporate credit research at S & P global ratings, told reporters However, in this context, all walks of life believe that strengthening trust and emphasizing intermediary accountability are necessary measures to protect the rights and interests of investors. At the same time, the evasion and cancellation of debt should not be equated with normal default, and the regulatory authorities have always maintained a zero tolerance attitude towards this. Source of this article: Guo Chenqi, editor in charge of first finance and Economics_ NBJ9931

At present, a series of announcements of the association also indicate that in the future, the issuers should improve their credit obligations, especially the standardization and transparency of financial information disclosure of local governments. At the same time, we should further standardize the responsibilities and obligations of intermediaries, and should have corresponding policy provisions and constraints in terms of information disclosure, due diligence, and continuous supervision, including the associations reference to the explicit prohibition of structured bond issuance, requiring the issuer not to directly subscribe, or actually be funded by the issuer, but indirectly subscribe through affiliated institutions, asset management products, etc For the issued debt financing instruments, the issuer shall make relevant commitments in the issuance plan and confirm them in the issuance announcement. Underwriters and investors shall not intentionally assist the issuer in self financing.