Since this year, the ranks of listed companies that repurchase shares have continued to expand. According to China stock market news choice, as of March 24 this year, 220 listed companies in the A-share market have announced repurchase plans, an increase of 46% over the same period last year. Among them, four listed companies plan to repurchase shares by issuing bonds, which is different.
According to the observation of the reporter of Securities Daily, after the disclosure of the relevant plans, the shares of the four listed companies planning to “issue bonds” for repurchase are sought after by investors in the secondary market.
bear the increase of debt ratio and the pressure of debt repayment
“bond issuance” repo is a little difficult
“It is not a financial innovation for listed companies to repurchase through issuing bonds, which has long been stipulated in the relevant repurchase regulations. From the market situation, at present, more than 90% of the repurchase funds of listed companies come from their own funds, some of them borrow from financial institutions or shareholders, and some companies raise funds to repurchase by means of corporate bonds, convertible bonds and preferred shares.” CEN bin, vice president of the Research Institute, told the reporter that the listed companies with high quality of repo have multiple sources of funds, and the research institute has also tried to buy back the listed companies with high quality.
Article 10 of the share repurchase rules of listed companies stipulates that the source of funds used by listed companies for repurchase must be legal and compliant.
Judging from the current four “bond issuance” repurchase companies, their sources of funds are different: among them, China Molybdenum Co.Ltd(603993) , Polaris Bay Group Co.Ltd(600155) have adopted the way of issuing corporate bonds; While Shanying International Holdings Co.Ltd(600567) and Southern Publishing And Media Co.Ltd(601900) are repurchased with “self owned funds + issuance of corporate bonds”.
CEN bin believes that “bond issuance” repurchase is also a kind of leverage, which will raise the company’s debt ratio. Therefore, this way to obtain funds for repurchase is more suitable for companies with low debt ratio and strong solvency. “For example, although the asset liability ratio of Polaris Bay Group Co.Ltd(600155) is about 70%, its debt ratio is moderate in the financial industry.”
In fact, as of the third quarter of 2021, of the above four companies, except Southern Publishing And Media Co.Ltd(601900) debt ratio is less than 50%, the other three companies are between 60% and 70%.
According to Dong Dengxin, director of the Institute of Finance and securities of Wuhan University of science and technology, the threshold of “bond issuance” repo is not low, taking into account the possible increase in debt ratio and other factors. “If a listed company repurchases its shares by issuing bonds, its debt ratio must be low, otherwise it will increase the debt burden of the enterprise and affect its normal operation; secondly, the listed company also expresses’ self-confidence ‘to a certain extent, such as meeting the requirements for issuing bonds and having strong solvency. At the same time, this often symbolizes that the company firmly believes that its share price has been seriously underestimated.”
Dong Dengxin further introduced to the reporter of Securities Daily: “only when the enterprise has sufficient cash flow and stable operation can it be able to repurchase shares through bond financing and use the shares for equity incentive, employee stock ownership plan, etc.”
or affected by financial regulatory requirements
few companies follow suit
Industry insiders believe that, generally speaking, compared with the repurchase of enterprises through their own funds, the process of “bond issuance” repurchase is more complex and has more requirements for enterprises. Listed companies have higher autonomy in using their own funds to repurchase and can quickly complete the implementation of the repurchase plan. Some companies take only more than a week from the announcement of the share repurchase plan to the completion of the implementation of the plan. The “bond issuance” repurchase requires listed companies to successfully issue bonds before repurchase.
In order to improve the repurchase efficiency, Shanying International Holdings Co.Ltd(600567) said in the announcement that the sources of repurchase funds are the company’s own funds and the funds raised from the issuance of corporate bonds. If the company repurchases with its own funds before the issuance of corporate bonds according to the market conditions, the corresponding funds can be replaced by the funds raised from the issuance of corporate bonds within a certain time after the repurchase.
Wang Lun, chief investment adviser of Shenzhen xinrand, told the Securities Daily that recently, listed companies have intensively released repurchase plans, but few companies follow the trend of “bond issuance” repurchase, because this involves the regulatory requirements of bond issuance in corporate finance. Only companies that meet the conditions can use this method, which is more complex than the repurchase process of their own funds.
Wang Lun further said that although the “bond issuance” repurchase can better reflect the determination and confidence of Listed Companies in maintaining their own value, it also shows that the current cash situation of the company is not loose from another level. It is necessary to comprehensively analyze the changes in the company’s financial level brought by bond issuance and its impact on the subsequent operation of the company.
Fu Lichun, founding partner of Yuntai capital, believes that the “bond issuance” repurchase reflects that listed companies are more planning for their own capital operation. In the process of bond issuance, the purpose of the raised funds must be clearly defined according to the basic characteristics of the “offer”. Compared with the “flickering” repurchase that some listed companies ostensibly repurchase with their own funds but actually do not operate for a long time, the purpose of the bonds issued by listed companies for repurchase is relatively clear.
Fu Lichun said: “although the issuance of bonds by listed companies will increase the asset liability ratio, it also shows that the company has a certain solvency, and the market recognizes the bonds issued by the company. Some companies issue bonds through the bond issuance platform of the exchange, with low interest rate, which can also reduce the debt cost.”
In addition, ordinary investors are also optimistic about the “bond issuance” repurchase behavior of listed companies. Many investors interviewed by the reporter of Securities Daily said that this behavior has released a positive signal to the market. “The repurchase of listed companies is a signal to the market that the share price is seriously undervalued, not to mention that listed companies issue bonds and borrow money to buy stocks.” An investor told reporters.
