Research On The Merger And Acquisition Risk Of Directional Convertible Bonds In Manufacturing Industry

With the continuous development of China's economy,the market reform of m&a is also deepening.Issued by the securities regulatory commission on November 2018,the directional convertible securities regulatory commission support the development of the listed companies to increase the elasticity of m&a,provide a flexible mechanism,alleviate the pressure of the listed company's cash and large shareholders' equity dilution risk,on the same day began to pilot directional convertible bonds for m&a.In fact,as early as 2014,the state council issued the opinions on further optimizing the market environment for enterprise reorganizations and the measures for the management of listed companies' material assets reorganization successively,emphasizing that eligible enterprises should issue directional convertible bonds as the payment method.However,relevant rules were not issued,which resulted the failure of the implementation of the policy.In 2017,in order to promote the m&a of directional convertible bonds,the state has issued the guidance on carrying out bonds of innovative companies and the implementation rules for the non-public issuance of convertible bonds by innovative companies.All these guidance support directional convertible bonds for m&a.As the first company to issue directional convertible bonds for m&a after the policy,this paper makes analysis in the form of cases.First,based on the background of m&a,Secote issue directional convertible bonds because of policy promotion,insufficient capital and low financing cost.Next,by comparison,We found that the advantage lies in that it effectively alleviates the problem of insufficient capital of Secote.By comparing with the convertible bonds issued by the public and other payment methods.However,it is found that there are still some risks,such as the risk of early buybacks,unconverted shares at maturity and performance commitments that fall short.Combined with similar cases,We promote enterprises should reasonably plan the cash flow,improve the corresponding terms of equity conversion and should set two-way performance commitment.It is hoped that the analysis of this case can provide references for similar transactions in the future.