Research On The Financing Effect Of Perpetual Bond Issued By Enterprises

Since 2015,the state has made it clear that it will implement supply-side structural reforms,and has put forward a policy of three eliminations,one reduction and one subsidy for the macro economy.Adjusting macro leverage has become one of the important means to promote high-quality economic development.Our country’s state-owned enterprises generally have high financial leverage.Since perpetual bonds can be classified as equity instruments and reduce the asset-liability ratio,compared with ordinary shares,the financing cost is low and will not dilute shareholders’ rights,more and more state-owned enterprises choose to issue perpetual bonds,becoming the main force in the perpetual bond issuance market.Therefore,it is of great significance to study the financing effect of perpetual bonds.This thesis selects SDIC Power,a representative enterprise with a high level of debt in the power industry,and takes its perpetual bond financing case as the research object.In the case introduction part,first of all,the financing background of SDIC Power is sorted out,and it is found that the main reasons for its issuance of perpetual bonds are:(1)to expand financing channels;(2)to reduce financial leverage and optimize capital structure;(3)to provide long-term low-cost financial support for the industry transformation and upgrading.Secondly,it introduces the terms and conditions of SDIC Power’s perpetual bond financing.SDIC Power first tries to use perpetual bonds for financing in 2018,and issues three tranches of renewable corporate bonds that year,and the earliest issued 18 Power Y1 is used as the example to briefly analyze the terms of the perpetual bonds.Finally,it explores the motivation for SDIC Power to redeem perpetual bonds.In the case analysis part,this thesis analyzes the financing effect of SDIC Power’s issuance of perpetual bonds from three different perspectives,and draws conclusions:(1)Taking the three-phase perpetual bonds issued by SDIC Power in 2018 as the research object,under the same conditions as the scale and purpose of the raised funds,and the profit before interest and tax,the renewable corporate bonds issued by SDIC Power are replaced with ordinary shares and ordinary corporate bonds,respectively.It is found that the cost of perpetual bond financing is between ordinary bonds and equity financing,but it has the advantages of not diluting shareholders’ equity and optimizing the asset structure.At the same time,perpetual bond financing has potential financial risks;(2)The business situation before and after the issuance of perpetual bonds by SDIC Power is analyzed from the three aspects of debt repayment,operation and profit,and it is found that the financial situation of the company has improved.Through the analysis of EVA and Tobin’s Q value,it is found that in general perpetual bond financing will increase corporate value;(3)The event research method is used to explore the market announcement effect of SDIC Power’s issuance of perpetual bonds,and it is found that this perpetual bond financing shows a positive market reaction,indicating that investors are supportive.In general,SDIC Power’s perpetual bond financing has a good effect.Based on the analysis of the case,this thesis draws the following enlightenment on how enterprises can make good use of perpetual bonds: first,enterprises should consider their own actual situation and improve the efficiency of capital use;second,enterprises should seize the timing of issuance,and reasonably design and use the terms of perpetual bonds;third,enterprises should pay attention to policy risks related to perpetual bonds.