The Case Analysis Of Convertible Bond Financing Of Bohui Paper Co.,Ltd

The convertible bond is an emerging financing tool in China,serving as a complex financial product combined the bond properties with the nature of stock.The first convertible bond was originated from and issued in the US in 1843.With its development of 173 years,the convertible bond has been surging in regard of its scale of financing,and turned into a universal financial product.For recent years in particular,with rapid economic development,many enterprises fund through issuing convertible bonds,with the total annual amount of issuing far more than USD hundreds of billions.It doesn't only cope with financial issues for foreign enterprises,but also promotes the sound development of the foreign capital market to some extent.China's first convertible bond was issued in the early 1990 s,marking its official access into our domestic capital market.However,its amount of issuing has been relatively low due to its novelty and limited research to our country.When it turns to the 21 st century,its issuing amount began to boom in the domestic market.Its development isn't mature yet for its late entry to our capital market as well as for incomplete theoretical research.Its distinguished advantages are demonstrated by its comparison with bond financing preference regarding lower financing cost,and with equity financing concerning less negative effects brought about by equity dilution.The paper draws a conclusion of the experience from the financing in the case based on a study of financing plan,financial effects and causes,which is conductive to enterprises for choosing appropriate financing modes based on the actual situation.This paper consists of six sections as follows:The first section is the introduction indicating the research significance and background of this subject.It reviews the relevant literature concerning enterprise financing preference and convertible bond financing,elaborating the research thought and approach as well as purifying the basic framework.The second section describes the theory outline of convertible bond financing.It first illustrates the definitions of the financing mode and convertible bond,then introduces what consists of the convertible bond financing decision-making,including feasibility analysis,design of financing plans and its implementation process,and last analyzes its three basic theories.The third section gives an introduction to Bohui Paper Company concerning the background and scheme in respect of convertible bond financing.It first introduces the background for financing from such three aspects as company profile,state of operation and financial condition.Then it analyzes the feasibility of financing,and then details the scale,bond conversion pricing,as well as the setting for protective provisions,and finally explains about how to choose the time of issuance,and the implementation process for issuing,bond exchange,and redemption on maturity.The fourth section is about the financial effect and cause of convertible bond financing of the company,which mainly analyzes the impacts of financial performance,cash flow,and enterprise stock price and the causes for them.Moreover,it focuses on the aspects of tax shield effect,capital structure optimization,equity dilution effect,and continuous financing.The fifth section discusses the enlightenment from the case of Bohui,summing up its experience and putting forward two notes.The sixth section is the conclusion.This paper collects,summarizes and sorts out a large sum of data during theory illustration and case analysis.Its enlightenment from the case is aimed to provide reference for enterprises.