From The Perspective Of Contract Design The Application Research Of Directional Convertible Bonds In Mergers And Acquisitions Transactions

In recent years,due to the deterioration of the refinancing situation in the domestic capital market and the implementation of the new refinancing regulations,the private placement has been strictly restricted,which has brought great obstacles to corporate financing,resulting in a significant decline in the number and amount of mergers and acquisitions completed by listed companies.In order to implement the call of the country to "turn high-speed economic development to high-quality development",the capital market ushered in a new round of M&A boom,but the existing payment and financing methods can not meet the M&A needs of enterprises due to their own limitations and policy restrictions,and directional convertible bonds,as a new type of M&A financing and payment method with both equity and debt nature,can solve the problem of difficult financing for enterprises to a certain extent,which is conducive to improving the success rate of M&A and promoting the in-depth reform of M&A transactions of listed companies.With the vigorous promotion of regulators,the frequency of use of directional convertible bonds by listed companies has greatly increased,but in previous M&A transactions,directional convertible bonds usually appear alone as financing tools or payment tools,CSICP is the first listed company to use it for both payment and financing,its application effect has greater reference value.And the contractual terms of the bond can convey the financing purpose of the enterprise and other information and have a binding effect on the issuer and creditors,which is an important factor in the study of the bond financing decision of the enterprise.Therefore,it is of certain research value to study the application effect of directional convertible bonds in CSICP M&A transactions based on the terms of bond contracts.So,why did CSICP decide to introduce directional convertible bonds in this M&A transaction?After choosing to use directional convertible bonds,how are the terms of their covenants designed?What is the result?Based on the theory of information asymmetry,optimal financing theory and synergy effect,this paper uses literature analysis and case study method to explore the above problems from multiple angles,and finally concludes the following:(1)Under the background of cold private placement and more restrictions on the issuance of public convertible bonds,directional convertible bonds can give full play to their policy dividend advantages,have great advantages in issuance threshold and review procedures,and can overcome the shortcomings of other traditional financing payment tools,which is to reduce financial risks and smooth the effect of equity dilution A better choice for broadening corporate financing channels.(2)Compared with the directional convertible bonds and public convertible bonds issued by other enterprises,the contract clauses designed by CSICP have the following characteristics:①Extending the lock-up period and restricted sale period of the bonds can delay the progress of the investor’s short-term share conversion,smooth the equity dilution effect,and ensure the stable operation of the listed company in the short term.②As a supplement to the amendment clause on the price of publicly offered convertible bonds,the upward amendment clause can ensure the enthusiasm of the holders of the directional convertible bonds to convert shares to the greatest extent,and at the same time,it relieves the cash pressure of principal and interest repayment at maturity.③Compared with convertible bonds,the CSRC’s requirements of directional convertible bonds for the net assets of issuers have been relaxed,and guarantees and ratings are not mandatory,which is conducive to the completion of M&A transactions and saves the main merger the cost of rating.(3)The improper timing of the issuance and the decline in profitability hindered the process of CSICP’s share transfer.Through analysis,it can be seen that the timing of the issuance chosen by CSICP is not conducive to the conversion of shares,and its stock price is always lower than the conversion price after the issuance,which directly affects the investor’s decision to convert shares,and the main reason for this problem is that the gross profit of CSICP’ main business has decreased year by year,and the gap with the industry average has gradually widened,resulting in a significant decline in its profitability,and its continuous repurchase and issuance of a certain number of ordinary shares has also caused its stock price to fluctuate.In view of the above conclusions,this paper makes suggestions from the perspectives of directional convertible bond issuers and regulators:for enterprises,it is necessary to reasonably determine whether to apply directional convertible bonds based on their own circumstances,and then flexibly design terms according to the purpose of issuance to play the governance function or financing function of directional convertible bonds and their own needs,and pay attention to whether the timing of issuance and equity conversion are appropriate;Regulators should draw on the regulatory experience of cases that have successfully completed M&A transactions through directional convertible bonds,determine the bottom-line principle provisions as soon as possible,and continuously improve relevant laws and regulations.