Case Study On Financing Of Private Exchangeable Bonds Issued By Tunghsu Group

On May 27,2017,due to the implementation of the new reduction regulations,the three traditional methods of reduction including aggregate auction,block trades and agreement transfers were restricted.In March 2018,the new regulations on equity pledge were implemented,so the way that private enterprises raised funds through equity pledges was also restricted.With the implementation of these new relevant policies,the financing channels of private enterprises have further narrowed.As an emerging financing tool,exchangeable bonds have their own unique advantages in low-interest financing and shareholding reduction.Therefore,they are gradually favored by large shareholders who have financing needs or wants to reduce their holdings.However,in the existing research literature,there are few case studies on exchangeable bonds.As one of the few bond issuers,Tunghsu Group issued two private equity exchange bonds in 2015,namely“15Dongji EB”and“15Dongji 01”.In this case,the issuer Tunghsu Group not only raised the required funds,but also successfully reduced its Tunghsu Optoelectronics shares through the investor's share swap operation during the share swap period.This paper intends to enrich the research literature on the issue of exchangeable bonds in China by analyzing the case,and provide theoretical help for enterprises that want to use this financing tool to raise funds or reduce shares.This paper is based on the perspective of the enterprise.Firstly,it defines the related concepts of exchangeable bonds,statistically analyzes the current development status of the exchangeable bond market and summarizes the financing advantages of exchangeable bonds.At the same time,the theory of capital structure provides a solid theoretical basis for the case study.Then,from the analysis of the financial and operational status of Tunghsu Group and its subsidiary company Dongxu Guangdian before the issuance of bonds,the financing needs of the company at the current stage,and use the case analysis method and comparative analysis method to summarize the real bond motive for Tunghsu group.Analyze whether the company's terms and conditions,timing of issue and bond pricing are reasonable.Exploring the risks involved in company terms,timing,and bond pricing.In the bond pricing part,the Black-Scholes option pricing model and the Monte Carlo pricing model are used.By comparison,the pricing of exchangeable bonds under the Monte Carlo method is more accurate.At the same time,according to the sensitivity analysis,the stock price fluctuation of the target company is the most important factor affecting the pricing of the bond.To control the pricing risk,it is necessary to pay close attention to the underlying stock price trend.Then,by comparing the changes of various indicators,including the company's capital structure,operating performance and related indicators of the controlling position,it is analyzed whether the financing effect generated by the Tunghsu Group's issue of the exchangeable bonds has reached the expected purpose of issuing bonds.In addition,in the chapter on research financing effects,this paper introduces the investor's perspective and analyzes the actual profit and loss of institutional investors and secondary market investors,in order to more comprehensively analyze the issuance of this exchangeable bond and view the impact of the issue on the capital market.Finally,based on the above research,the conclusions of this case are drawn,and corresponding revelation suggestions are proposed from the perspectives of regulators,issuers and investors,which is conducive to further improving China's exchangeable bond market.