Convertible Bond Financing Risk And Inspiration

Because the convertible bonds has low financing costs and low investment risk.It has become an important financing tool for listed companies.In our country.Since the Baoan group issued the first convertible bonds in 1992.The convertible bonds continues to develop in the Chinese market.Non-tradable shares reform led to a total stagnation in primary stock market.Convertible bond market has experienced a period of up to 20 months vacuum of the primary stock market.And this state has continued until 2006 when “management of listed companies to issue securities” introduced.In 2010,with the issuance of convertible bonds in the Bank of China,convertible bond market to enter the era of the market bonds.The scale of convertible bonds in 2011 exceeded 100 billion yuan.And the value reached 170 billion at the beginning of the bull market at the end of 2014.But as the great bull market of 2014-2015 comes,many convertible bonds have touched off,redeemed and conversion.Convertible bond market has shrunk to about 20 billion yuan.To date,the rhythm of the issue of convertible bonds also be disrupted with the stock market greatly adjusted.Faced with jittery markets,it is particularly important for listed companies to focus on the issue of convertible bonds.This paper mainly adopts the research methods of combining normative research and case study.Analysis of a large number of domestic and foreign literatures in the normative research section.Then conclude and summarize them.Analysis of the definition,composition,advantages of convertible bonds,and the difference between the traditional way of financing and risk structure from the theoretical level.In case study,we select Wuxi Suntech electric power issue convertible bond financing failure case to analysis.Through the analysis of the financial situation of the issue of convertible bonds and the use of charts and other tools to more intuitive grasp of the operating performance and financing changes before and after the issuance of convertible bonds in Wuxi Suntech electric power.Then,we evaluate the facts that Wuxi Suntech electric power due to the issue of convertible bonds to bring the risk resulting in the eventual bankruptcy reorganization.Finally,based on the above related research,Based on the above related research,we can get the relevant suggestions and implications for the listed companies to deal with the risk of convertible bond financing.First,this paper summarizes what is convertible bonds.And then analyzes the theoretical basis of convertible bonds.Then the paper puts forward the possible risks of the issuance of the convertible bond issuance,the design risk,the operation risk and the financial risk.In this paper,Wuxi Suntech Electric Power Co.,Ltd.to issue convertible bond financing failure event as a case.Review the process of Wuxi Suntech electric power issue convertible bond.And we do an analysis of the financial situation of the issue of convertible bonds.The reason for the failure of Suntech electric power convertible bond was found in the study.Such as,improper financing methods and timing,inaccurate long-term estimates of operating performance of the company,unreasonable financing terms design,unreasonable estimate of the investment risks resulting from financing.At the end of this paper,we put forward inspirations from the case about how to reduce the risk of enterprises issuing convertible bonds.Reasonable estimation and planning of their own operating conditions,operating risks,performance growth rate,etc.When selecting the timing of the issue,we should take into account the factors such as market interest rates during the duration of the bond.The terms of the design should not only have a certain investment attraction,but also to enable the issuer to improve economic benefits.In the period of issue,the enterprise can predict the risk of its financial indicators from two aspects of macro and micro.