① On the afternoon of January 11, Jiangyin Bank announced that it received regulatory approval, approved Jiangnan Water's shareholder status, and agreed to increase its holdings of Jiangyin Bank shares within six months from the date of approval, and hold 5% to 10% (excluding capital) of shares after the increase in holdings was completed. ② As of the close of trading on January 11, Jiangyin's debt-for-share premium rate was 14.89%, and the conversion price was 3.96 yuan/share, higher than the closing price of 3.65 yuan/share.
Financial Services Association, January 11 (Reporter Guo Zishuo) Jiangyin Bank's shareholder status of Jiangnan Water has certainly been approved.
On the afternoon of January 11, Jiangyin Bank announced that it received the “Approval from the Wuxi Supervisory Branch of the State Financial Supervisory Authority on the Shareholder Eligibility of Jiangsu Jiangnan Water Co., Ltd.”, approved the shareholder status of Jiangsu Jiangnan Water Co., Ltd. and agreed that Jiangnan Water would increase its holdings of Jiangyin Bank shares within six months from the date of approval, and hold 5% to 10% (excluding capital) of Jiangyin Bank after the increase was completed.
At this point, Jiangnan Water has completed all the regulatory approval process to increase its holdings in Jiangyin Bank through debt-to-equity swaps and become a shareholder of 5% or more.
The conversion premium rate is close to 15%
Previously, the market generally anticipated that Jiangnan Water would increase its holdings in Jiangyin Bank through debt-to-equity swaps, and eventually become the largest shareholder. According to the latest financial report of Jiangyin Bank, the largest shareholder, Jiangyin Xinjinnan Investment and Development Co., Ltd., has a shareholding ratio of 4.18%.
Introducing strategic investors to increase their holdings through debt-for-conversion allows banks to avoid large payments, and at the same time, debt-for-equity swaps can also greatly supplement the bank's core Tier 1 capital. However, judging from past cases, new shareholders generally need to switch shares at a premium.
According to public data, as of the close of January 11, Jiangyin's debt-for-share premium rate was 14.89%, and the conversion price was 3.96 yuan/share, higher than the closing price of 3.65 yuan/share. In other words, if debt were to be converted into shares at the current price, it would be a “loss-making” transaction for Jiangnan Water.
According to information disclosed by Jiangnan Water in November of the previous year, the company plans to use no more than 600 million yuan of its own capital to purchase “Jiangyin Convertible Bonds” and implement a share conversion to become a shareholder of Jiangyin Bank. As of January 5, 2024, Jiangnan Water has increased its total holdings of “Jiangyin Convertible Bonds” by matching transactions and negotiated transactions through the Shenzhen Stock Exchange trading system, accounting for 21.03% of the total number of “Jiangyin Convertible Bonds” issued.
Jiangnan Water pointed out at the same time that the company became a shareholder of Jiangyin Bank by purchasing Jiangyin Bank's bonds and implementing a share transfer. On the one hand, it can obtain financial investment benefits, optimize the profit structure, and enhance returns for all shareholders; on the other hand, it can further enhance the company's strength, develop the company's business layout, and achieve complementary resources and synergies with Jiangyin Bank.
Prior to that, China Huarong temporarily purchased Everbright Convertible Bonds, purchasing 40.56% of the total amount issued, and eventually became the top five shareholders of Everbright Bank.
Jiangyin debt conversion still faces some uncertainty
According to the “Third Prompt Notice Concerning the Maturity Payment and Delisting of “Jiangyin Bonds” issued by Jiangyin Bank on December 26, 2023, Jiangyin Bonds will stop trading from January 24, 2014. Moreover, Jiangyin Convertible Bonds will officially expire and be delisted on January 29, 2024. However, Jiangyin Bank's convertible debt-to-equity swaps in the fourth quarter of 2023 were not optimistic. At that time, the amount of Jiangyin Convertible Bonds that had not yet been converted to shares was 1,757.888 billion yuan, accounting for 87.8941% of the total amount of Jiangyin Convertible Bonds issued.
Li Qinghe, head of Huafu Fixed Income, believes that against the backdrop of declining bank stock volatility, it is generally more difficult for banks to convert bonds to shares. The four bank bonds, including Jiangyin, Wuxi, Sunong, and Zhang Hang, will all expire within 2024, yet the proportion of unconverted shares is over 70%.
Jiangyin Bank also warned today that there is some uncertainty about whether Jiangnan Water will eventually become the main shareholder of Jiangyin Bank.
Due to the large number of unconverted shares, Jiangyin Bank once mobilized a senior team to absorb Jiangyin's debt conversion.
A week ago, Jiangyin Bank announced that some directors, supervisors, senior management and core key personnel plan to increase their holdings by no less than 10 million yuan and no more than 20 million yuan in total for six months starting January 9. The relevant parties mentioned above will increase their holdings by purchasing convertible corporate bonds and converting shares or purchasing Jiangyin Bank shares through centralized bidding in the secondary market. There is no price range for this holdings increase plan; the price of increasing holdings is determined according to the market price.