Research On The Legal System Of Exchangeable Bond

In December2014, Baosteel Group successfully issued its exchangeable bond(hereafter referred to as EB), which was the first public offering of EB in Mainland China.Since then, EB finally entered the open market in China.As a new financing tool, EB enjoys its unique advantages, which will help extend financing channels for the shareholders of listed companies, and further improve China bond market. EB came into being in China mainly to solve the problem of the lifted shares caused by share splitting reform. Therefore, EB was expected to work as the “market buffer” ever since its emergence.However, EB hasn’t attracted the attention of restricted share holders for its high issuing threshold and cost, as well as the complicated issuing process. So EB hardly fulfills its expectation. In the perspective of the innovation of financing tool, EB in China still has some problems in its regulations, the root cause of which are the imbalance between risks and interests of bond issuers,and that of bond holders, as well as the imbalance of the interests between the two parties.This paper aims to reveal the existing problems of EB in China, analyze the theories of EB and put forward the feasible suggestions for these problems. Instead of analyzing from the perspectives of bond creditors or debtors, this paper endeavors to probe into EB and find paths to the balance between EB creditors and debtors.This paper is divided into four parts.The first part reveals the main problems faced by EM regulations from the perspective of the interest imbalance between different parties.The second part summarizes the EB regulations, and clarifies the basic theories by comparison of different bond types. Moreover, the authors analyzes the legal nature and values of EB and emphasizes its importance and significance.In the exchangeable bonds, creditors’ claims are divided into two stages, but whether it’s in front of the exchange period servicing stage, exercise his option or the exchange period of stage, is the embodiment of the rights of bondholders. Through the exercise of the option, exchangeable bonds creditors or charge of principal and interest income, or bond and stock, become a shareholder in the listed company, the shareholders’ rights. So the issuer need according to the requirement of the bondholders pay accordingly, whether paid or stock to pay the payment of the debt is.The third part analyzes in detail the interests of EB creditors and debtors, as well as the related laws. Also, it generally analyzes the key clauses of terms.The fourth part puts forward the suggestions to improve Chinese EB regulations and answers the questions raised in former part from the perspectives of the interests of creditors and debtors.The main measures of investors is improve the system of investors appropriateness, strengthen the joint information disclosure system, intensify exchangeable debt guarantees and improve product design terms; The main measures of the issuer is lower threshold, cancel the infinite and improve the product design of the terms of sale.