Upon approval by the China Securities Regulatory Commission, the Shanghai Stock Exchange (SSE) recently releases the “SSE Notice of Relevant Issues of Launching Pilot Business of Private Placement Bonds for Mergers, Acquisitions and Reorganizations” (the “Notice” for short), in a bid to implement requirements in the “Opinions of the State Council on Further Optimizing Market Environment for Enterprises’ Mergers, Acquisitions and Reorganizations” and relevant documents and give full play to the positive role of the capital market in propelling enterprises’ mergers, acquisitions and reorganizations. The SSE’s move marks the official launch of the pilot work for private placement bonds for mergers, acquisitions and reorganizations.
Capital source is one of the bottleneck problems in mergers, acquisitions and reorganizations of China’s enterprises, and the availability of private placement bonds for mergers, acquisitions and reorganizations will contribute to providing another way for financing of enterprises’ mergers and acquisitions, enhancing financing efficiency, boosting adjustments to China’s economic and industrial structures, and strengthening industrial concentration, thus fueling the growth of the real economy.
Generally, private placement bonds for mergers, acquisitions and reorganizations inherits the institutional framework of the exchange market for private placement bonds and makes proper adjustments according to the characteristics of mergers, acquisitions and reorganizations. It is stipulated in the “Notice” that issuers of private placement bonds for mergers, acquisitions and reorganizations should be corporate-system legal persons, which do not include listed companies on the SSE and the Shenzhen Stock Exchange temporarily in the initial stage; non-public issuance should be adopted for private placement bonds for mergers, acquisitions and reorganizations, which should be issued and transferred to eligible institutional investors after being filed with the exchange; raised funds should be mainly used to support mergers, acquisitions and reorganizations, including but not limited to payments and loan reimbursement for mergers, acquisitions and reorganizations.
An official of the SSE introduces that the SSE has built a set of service mechanisms for filing, transfer, and information disclosure of private placement bonds since the launch of SMEs private placement bonds in 2012; the private placement bonds for mergers, acquisitions and reorganizations will be handled according to relevant business procedures for private placement bonds. Next, the SSE will improve the market infrastructure, virtuously carry out product innovation for private placement bonds, and cement the investor protection mechanism, so as to further boost the steady growth of the exchange-traded bond market.