Case Study On Financing Of Convertible Bonds Of Xin Steel Company

In late 2018,the Securities Regulatory Commission issued a policy that reads "In order to support and promote the development of listed companies,it is decided to vigorously promote the pilot work of M&A convertible bonds",making convertible bonds once again a hot topic in the Chinese economic market.As a matter of fact,convertible bonds are a new type of financing tool with all the features of bonds,options and stocks,playing an important role in the financing process of listed companies,and listed companies reflect on convertible bonds in the hope of raising more funds at a lower cost,in other words,to achieve the ultimate goal of conversion.However,the convertible bond market is still in its initial stage,and most companies can only see the advantages of convertible bonds,ignoring the fact that there will be corresponding risks in the financing process of convertible bonds,which will eventually easily lead to the failure of convertible bond issuance,which is far from the purpose of the company.With regard to the design of the issuance terms of convertible bonds in China,due to the lack of differentiation and similar terms,listed companies in China lack sufficient attention,resulting in certain risks in their financing activities.Now that we are in the early stage of the development of convertible bonds,it is of great practical significance to explore the financing risks of convertible bonds.At present,domestic scholars mostly study the interest rate setting and the content of the issuance terms of convertible bonds,but it is relatively rare to study them in combination with cases,and there are few cases analyzing the financing risks of convertible bonds from the perspective of risks.This paper chooses to take Xinsteel as the subject of study in the hope that the analysis of Xinsteel will serve as a warning to other issuing companies not to follow the trend blindly,but to choose a suitable financing method for their own companies.Firstly,this paper provides a brief introduction to Xinsteel and its industry,and then introduces the financing of Xinsteel’s convertible bond issue from three aspects: the terms of the bond issue,the motivation for the issue and the failure process.Secondly,the paper identifies and analyses the risks of Xinsteel during the issuance of Xinsteel convertible bonds by looking up relevant information and combining financial indicators,and finds that there are risks in the timing of the issuance,the design of the terms and conditions,the repayment at maturity and the risks of the company itself.Finally,the company proposes preventive measures against these risks.Firstly,the company should not only pay attention to its own economic development,but also pay close attention to the economic changes in the general market.Thirdly,it is recommended that companies adopt the measures of agreeing to redeem convertible bonds by installments or "borrowing new bonds" to prevent the risk of repayment at maturity,and fourthly,it is recommended that listed companies establish a risk evaluation system for convertible bond financing.In the process of convertible bond development,Xinsteel convertible bond is in fact a representative case.It is hoped that the discussion in this paper will enable listed companies to identify and solve the risks that exist during the financing process of convertible bonds in the future.