CHINA: SSE Introduces Business Rules for Targeted Convertible Bonds

Wednesday July 8 2020

On 1^st July 2020, the Shanghai Stock Exchange (SSE) announced that in order to implement the requirements of the China Securities Regulatory Commission (CSRC) for the pilot program of reform in targeted convertible bonds, give full play to the positive role of the targeted convertible bonds in mergers and acquisitions and reorganizations and refinancing, and effectively serve the market participants of targeted convertible bonds, since 2019, the Shanghai Stock Exchange (SSE) has conducted extensive research on the issuance, transfer, conversion to shares and other businesses of targeted convertible bonds, formulated the business plan and launched the IT development for the targeted convertible bonds. Up to now, the SSE has accomplished the registration of targeted convertible bond issuance for 6 listed companies.

Nearly RMB2 billion in total was paid with the targeted convertible bonds for restructuring consideration, and the auxiliary fundraising exceeded RMB5 billion, which has strongly supported the M&A and reorganization and refinancing of the listed companies.

The targeted convertible bonds will be transferred and converted through the SSE’s trading system. The relevant business arrangements in the Implementation Measures for targeted convertible bonds can basically meet the requirements for executing the individualized provisions of existing targeted convertible bonds on the trading system, and investors can complete the transfer, conversion to shares, sell-back and other orders and operations for the targeted convertible bonds online.

With the business rules further defined, the development of the targeted convertible bonds as a payment tool and financing instrument for listed companies’ M&A and reorganization will accelerate. At present, the SSE has put into use a designated code segment for the registration, transfer, conversion to shares, sell-back and other businesses of targeted convertible bonds, and the IT development of the trading system is steadily moving ahead.

Going forward, the SSE will further enhance market services, smoothly and orderly push forward the pilot program for targeted convertible bonds, extensively listen to opinions and suggestions in the market, and carefully formulate the Implementation Measures so as to fully meet the market-oriented needs of the listed companies in M&A and reorganization and refinancing, and facilitate the quality improvement of listed companies.

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