1. In the next 3 years, Ping An of China intends to issue bond financing tools at one time or in multiple tranches; 2. Ping An of China's financing may not be due to its relatively weak performance or funding shortage, but for other purposes; 3. If the financing proceeds are used for share buybacks, it will support the company's stock price.
Caixin News on July 10th (Reporter Xia Shuyuan): On July 10th, Ping An of China issued a statement in response to news of planned issuance of US convertible bonds. Among them, Ping An of China stated that, according to the annual shareholder meeting authorization, the company can issue debt financing tools at one time or in multiple tranches within the next three years. The Group will make corresponding decisions within the authorization range of the shareholder meeting based on business development, capital planning and other circumstances.
Wu Lixian, an international securities strategist at Everbright Securities, said that Ping An of China's financing may not be due to its relatively weak performance or funding shortage, but for other purposes. Because Ping An of China's core business has bottomed out in recent years, and although it has been affected by the sluggish investment market, it has little impact on its cash flow.
Ping An of China plans to issue bond financing tools at one time or in multiple tranches in the next 3 years.
On July 9th, there were market rumors that Ping An of China is considering issuing convertible bonds this year, involving up to $5 billion, and the proceeds will be used for financing purposes. However, relevant considerations are still in the initial stage, and the issuer needs to obtain regulatory approval for issuance. Ping An of China may also decide not to proceed with the issuance of convertible bonds.
In response to the above-mentioned market rumors, Ping An of China issued a statement on July 10th, indicating that the company has noticed news about its plan to issue US convertible bonds. According to the annual shareholder meeting authorization, Ping An of China may issue debt financing tools at one time or in multiple tranches within the next three years.
Ping An of China stated that based on business development, capital planning and other circumstances, and the principle of maximizing shareholder interests, the Group will make corresponding decisions within the authorization range of the shareholder meeting.
In addition, Ping An of China reiterated that it will strictly follow the applicable laws and regulations and relevant rules of the stock exchange where its shares are listed, and fulfill its disclosure obligations in accordance with the requirements of relevant regulatory authorities.
According to Caixin News reporters, since returning to the A-share market in 2007, Ping An of China issued convertible bonds worth 26 billion yuan in the A-share market in 2013.
At that time, Ping An of China stated that its solvency adequacy ratio faced certain pressure, and it issued convertible bonds to improve its solvency adequacy ratio, enhance capital strength, and meet the capital and capital needs of the three core businesses of insurance, banking and investment, all of which were growing rapidly.
Several companies have issued convertible bonds this year, and low-cost financing is one of the biggest attractions.
Convertible bonds are financial instruments that have the dual property of debt and equity, and allow holders to convert bonds into common shares of the issuing company according to pre-agreed conditions and prices. Industry insiders say that with the continuous decline in the issuance of Sino-US dollar bonds as a whole, convertible bonds have become a trend for Chinese offshore bonds this year.
For issuers, low-cost financing has become one of the biggest attractions of convertible bonds.
Chai Xu, a research analyst at United News, told Caixin News reporters that currently, pure debt financing through bonds or loans has a higher cost in the US dollar market, with a generally financing cost of 5%-6%, while convertible bonds have greatly reduced interest rates due to the embedded equity options.
For companies that issued US dollar convertible bonds this year, the face interest rates of the convertible bonds issued are generally low. For example, JD.com's interest rate is 0.25% and Alibaba's is 0.5%. According to estimates by relevant institutions, the quoted interest rate for the bonds previously issued by Alibaba corresponds to a common bond interest rate of more than 5.1% for the corresponding term.
In addition, another benefit of convertible bonds is that for companies that are actively expanding overseas business and whose revenue mostly comes from China's domestic market, convertible bonds can help companies effectively obtain foreign exchange and use funds to reduce losses caused by exchange rate fluctuations.
In the view of Tian Mingzi, a partner at Beijing Jingtian & Gongcheng Law Firm, many companies have issued convertible bonds to improve their debt structure, expand overseas business, and repurchase shares due to encouraging policies for overseas financing and enterprise go-global in China.
Industry insiders predict that more companies may use convertible bonds as financing tools in the future, which, if used for share buyback, will support the company's stock price.