① Unlike previous cases where it repeatedly increased its holdings through centralized bidding transactions in the secondary market, this time Great Wall Life increased its holdings through a premium conversion of convertible bonds. ② Industry insiders believe that increasing the holdings of convertible bonds and converting shares through targeted negotiations with shareholders can supplement bank capital and ease capital pressure on small and medium-sized banks. ③ Due to this equity change, Great Wall Life was promoted to the third largest shareholder of Bank of Wuxi.
Financial Services Association, January 22 (Reporter Zou Juntao) Following the listing of the Bank of Wuxi, Great Wall Life also “increased its holdings” through share swaps.
On the evening of January 22, the Bank of Wuxi (600908.SH) issued the “Indicative Notice Concerning Shareholders' Shareholding Ratio Increasing by More Than 1% Due to Implementing Convertible Debt-to-Share Convertible Bonds” (hereinafter referred to as the “Notice”), stating that Great Wall Life converted its 1,321,300 convertible bonds to the Bank's A-share common shares through a convertible debt-to-share conversion method, and the number of shares converted was 24,333,333 shares. After the share transfer, Great Wall Life increased its shares in Bank of Wuxi by more than 1%, reaching 6.36% of the total share capital.
A reporter from the Financial Services Association noticed that unlike the previous ones, which have repeatedly increased its holdings through centralized bidding transactions in the secondary market, this time Great Wall Life has increased its holdings through convertible debt-for-equity swaps, especially when there is a premium for converting bonds in Wuxi, which seems “contrary to normal.” And just last week, Jiangnan Water also increased its holdings of Jiangyin Bank through a convertible debt-for-share premium.
Great Wall Life increased its holdings in the Bank of Wuxi with a premium share transfer
According to the announcement, as of January 18, Great Wall Life held 114,531,356 shares of the Bank of Wuxi, accounting for 5.31% of the total share capital of the Bank of Wuxi. On January 19, Great Wall Life converted its 1,321,300 convertible bonds into ordinary shares of Bank of Wuxi A-shares through convertible debt-to-equity swaps. The number of shares converted was 24,333,333; on the same day, Great Wall Life also increased its holdings of Bank of Wuxi convertible bonds by 383,880.
According to previous announcements, Great Wall Life used centralized bidding in the secondary market to increase its holdings in the Bank of Wuxi in the past. For example, during 2023, Great Wall Life increased its holdings of Bank of Wuxi several times through centralized bidding in the secondary market.
For example, on the evening of January 11, the Bank of Wuxi issued an “Prompt Notice on Changes in Shareholders' Equity”, which shows that between December 29, 2023 and January 9, 2024, Great Wall Life increased its holdings of Bank of Wuxi shares 9,999,925 through centralized bidding transactions in the secondary market through the Shanghai Stock Exchange trading system. After the increase in holdings, Great Wall Life held a total of 5.00% of the total share capital of the Bank of Wuxi. This increase in holdings also triggered listing.
This time, Great Wall Life changed from convertible debt-to-equity swaps to increase its holdings, but it seems “contrary to normal.” A Financial Services Association reporter noticed that during this stock transfer period, Wuxi's debt conversion was still at a premium. According to Oriental Wealth data, as of the close of trading on January 22, the premium rate for converting bonds in Wuxi was 15.26%, and the conversion price was 5.43 yuan, while the current stock price of Wuxi convertible bonds is only 4.99 yuan/share.
Furthermore, the Financial Services Association reporter noticed that on January 15, Jiangnan Water also chose to take 6.13% of the bank's shares in one fell swoop through the Jiangyin Bank convertible debt-for-share method, becoming the largest shareholder of the latter. At the time, Jiangyin Convertible Bonds were also in a premium state. As of today's close, the Jiangyin Convertible Bonds Premium Rate has reached 17.23%.
From a rational point of view, with such a high premium on convertible bonds, choosing to increase your holdings through convertible debt-for-equity swaps is obviously not as cost-effective as buying original shares directly from the secondary market.
Why will some bank shareholders choose such “uneconomical” methods to increase their holdings one after another recently? A researcher at a brokerage agency in Southwest China told the Financial Federation reporter that as far as banks are concerned, the channels for banks to supplement capital from outside sources are currently relatively limited. Coupled with poor market conditions, the possibility of convertible debt-to-equity swaps is also greatly reduced. In 2024, another batch of convertible bonds will expire. Through targeted negotiations with shareholders to increase holdings and share conversion through convertible bonds, this can supplement bank capital and ease capital pressure on small and medium-sized banks. Although it is less economical for shareholders, the premium rate is relatively manageable, and the final effect is the same.
Great Wall Life Promotes the Third Largest Shareholder of Bank of Wuxi
It is worth noting that with the further increase in its holdings, Great Wall Life was promoted from the fourth largest shareholder of the Bank of Wuxi to the third largest shareholder.
According to data from the top ten shareholders of the Bank of Wuxi disclosed by Oriental Wealth Choice, as of the third quarter report of 2023, Wuxi Taihu Xincheng Asset Management Co., Ltd. held 9.08% of the shares, ranking as the largest shareholder; Guolian Trust Co., Ltd. held 7.73% of the shares, ranking the second largest shareholder; and Wuxi Xingda Nylon Co., Ltd. held 5.16% of the shares, ranking the third largest shareholder.
According to the announcement, after this equity change, Great Wall Life held 138,864,689 shares of the Bank of Wuxi, accounting for 6.36% of the total share capital of the Bank of Wuxi. This shareholding ratio has surpassed that of Wuxi Xingda Nylon Co., Ltd.
In addition, Great Wall Life also holds “Wuxi Convertible Bonds” with a face value of 38,388,000 yuan, accounting for 1.40% of the “Wuxi Convertible Bonds” unconverted balance. According to estimates by the Financial Services Association reporter, it is expected that after all of the convertible bonds mentioned above are converted to shares, Great Wall Life's share of the Bank of Wuxi will further increase to around 6.69%.
On the evening of January 22, the Bank of Wuxi disclosed an announcement regarding the maturity payment and delisting of the “Wuxi Bonds Transfer”. According to the announcement, the maturity date and payment registration date of the Wuxi Bond Exchange is January 30, but trading has been suspended since January 26, so January 25 is the last trading day for the Wuxi Bond Exchange. According to the announcement, the amount of principal and interest due from the conversion bonds in Wuxi is RMB 106.00 per card, and the payment date of the payment funds is January 31, 2024.