The forced redemption of convertible bonds in 2022 is earlier than that in Israel. On January 10, Binhua convertible bonds ushered in the last trading day. If investors still did not sell or convert shares before the closing of the day, they would be forced to redeem, with a direct loss of more than 40%. The strong redemption of Binhua convertible bonds is only the tip of the iceberg. Recently, due to the existence of structural market, many convertible bonds trigger the strong redemption threshold. Last year, the CSI convertible bond index rose by 18.48%, with obvious profit-making effect, and the winning of convertible bonds even fell below 1 / 10000.
multiple convertible bonds trigger forced redemption
On January 9, Befar Group Co.Ltd(601678) issued the sixth suggestive announcement on the redemption of “Binhua convertible bonds”. The announcement shows that the closing price of the company’s shares for 15 trading days from December 1, 2021 to December 21, 2021 has not been lower than 130% of the current conversion price of 4.58 yuan / share of “Binhua convertible bonds”, i.e. 5.95 yuan / share, which has met the redemption terms of “Binhua convertible bonds”.
According to the announcement, the redemption registration date is January 10, 2022, and the redemption price is 100.378 yuan / piece (bond face value and current accrued interest). The announcement pointed out that before the closing of the redemption registration day, the holders of “Binhua convertible bonds” can choose to continue trading in the bond market or convert them into shares of the company at the conversion price of 4.58 yuan / share. The holders of convertible bonds may consult the securities companies that have opened accounts for the specific matters concerning the conversion of shares. From the next trading day of redemption registration (January 11), “Binhua convertible bonds” will stop trading and share conversion. After the redemption, “Binhua convertible bonds” will be delisted in Shanghai Stock Exchange.
As of the closing on January 10, the latest secondary market price of Binhua convertible bonds was still as high as 169.2 yuan / piece, which had a huge price difference from the redemption price of 100.378 yuan / piece. If investors still did not sell or convert shares today, they would be forced to redeem, with a direct loss of 40.7%.
From the previous announcement of Befar Group Co.Ltd(601678) , the vast majority of investors have chosen to convert shares.
In addition to Binhua convertible bonds, “Junda convertible bonds” also announced a strong redemption intention. On January 9 Hainan Drinda Automotive Trim Co.Ltd(002865) , the third suggestive announcement on the implementation of Junda convertible bond redemption was issued. The announcement points out that the closing price of Hainan Drinda Automotive Trim Co.Ltd(002865) A shares for 15 consecutive 30 trading days from November 23, 2021 to January 4, 2022 is not lower than 130% (i.e. 19.25 yuan / share) of the current conversion price of “Junda convertible bonds”, which has triggered the agreed conditional redemption terms. According to the announcement, the redemption registration date of “Junda convertible bonds” is January 27, the redemption date is January 28, and the redemption price is 100.21 yuan / piece (including the current accrued interest, the current annual interest rate is 1.6%, and the current interest includes tax).
In addition, the trading of “Junda convertible bonds” is planned to be stopped on January 28, 2022. However, according to the relevant provisions of the detailed rules for the implementation of convertible corporate bond business of Shenzhen Stock Exchange, if the circulating face value of “Junda convertible bonds” is less than 30 million yuan, the trading will be stopped three trading days after the company issues the relevant announcement. Therefore, the trading time of “Junda convertible bonds” may be advanced.
On January 10, “Junda convertible bonds” rose by 19.16%, and the closing price was 423.02 yuan / piece, which was very different from the forced redemption price of 100.21 yuan / piece. If forced redemption was made at this price, the loss of investors would reach 76.3%.
In addition, Zhejiang Zhengyuan Zhihui Technology Co.Ltd(300645) and Guiyang Xintian Pharmaceutical Co.Ltd(002873) have recently issued similar suggestive announcements, indicating that the closing price of the company’s shares has exceeded 130% of the current conversion price for 10 consecutive trading days. If conditional redemption terms are triggered in the future, it will be in accordance with relevant regulations, At that time, the company has the right to decide to redeem all or part of the convertible bonds that have not been converted into shares at the price of the face value of the bonds plus the accrued interest of the current period.
the valuation of convertible bonds has reached an all-time high
In an interview with the 21st Century Business Herald reporter, private placement fund manager Xia Fengguang said that forced redemption of convertible bonds is the right of the issuer. The usual trigger condition is that the closing price of the main stock is not less than 130% of the conversion price on a certain trading day during the conversion period. At this time, the issuer, that is, the positive stock listed company, has the right to forcibly redeem the remaining convertible bonds issued, but whether it enforces its rights depends on the demands of the listed company. Because the interest rate of convertible bonds is low before and high after, some listed companies have little financial pressure and may not choose redemption to avoid premature dilution of share capital. The holders of convertible bonds shall pay attention to whether the convertible bonds they hold meet the conditions of compulsory redemption and the conversion premium rate of convertible bonds.
From the past cases of convertible bonds to shares, the vast majority of investors will convert shares or redeem them in time, but a small number of investors still make mistakes. For example, for individual holders of Baotong convertible bonds, December 30, 2021 was the last trading day of Baotong convertible bonds. On that day, the closing price of Baotong convertible bonds in the secondary market was 132.101 yuan, but the forced redemption price was only 100.458 yuan. If investors did not convert shares or sell them at the last moment, they would directly incur losses of up to 23.95% after being forced redeemed. In fact, according to the announcement of Wuxi Boton Technology Co.Ltd(300031) , as of December 31, 2021, the balance of remaining convertible bonds of Baotong convertible bonds was 89549, and the amount of remaining convertible bonds was 8954900 yuan. This part of convertible bonds will be redeemed by the company at 100.458 yuan / piece (including the current accrued interest on the redemption date, the current annual interest rate on the redemption date is 0.8%, and the current interest on the redemption date includes tax), The investors of the above Baotong convertible bonds will have a total direct loss of more than 2 million yuan.
Last year, convertible bonds may become the most profitable variety, and the CSI convertible bond index rose by 18.48%, leading the audience. Due to the obvious profit-making effect, the online winning rate of convertible bonds has fallen again and again, or even less than one ten thousandth. As Brightgene Bio-Medical Technology Co.Ltd(688166) announced, the company issued RMB 465 million convertible corporate bonds to unspecified objects, and the preferential placement and online subscription of the original shareholders have ended on January 4, 2022 (t day). According to the online priority placement data provided by the Shanghai Stock Exchange, the total number of Borui convertible bonds finally placed to the original shareholders of the company was 259200, or 259 million yuan, accounting for 55.74% of the total issuance. In addition, the final online Borui convertible bonds issued to general public investors was 206 million yuan (205800 hands), accounting for 44.26% of the total issuance, and the online winning rate was 0.00185637%.
Xia Fengguang said that at present, the convertible bond market has eliminated varieties below the face value, the average conversion premium rate has reached about 35%, and the yield to maturity is negative 5.4%. This has shown that the current convertible bond market generally no longer has debt bottom protection, and the linkage with positive stocks has been greatly enhanced. Therefore, to participate in the investment of convertible bonds at present, we need to pay close attention to the fundamentals of positive shares and conduct in-depth research on terms to make a reasonable choice between positive shares and convertible bonds. Due to the increased attention of investors to the convertible bond market and the continuous expansion of the scale of the convertible bond market, it is expected to remain active. However, it is difficult to reproduce the large-scale general rise of convertible bonds and the general improvement of valuation last year.
Yin Ruizhe, chief analyst of China Merchants Securities Co.Ltd(600999) fixed income, also believes that at present, the valuation of the convertible bond market has been at an all-time high, but the entry of funds from bank financial companies into the market in 2022 is still a general trend. At the same time, under the background of downward interest rate, investors\’ pursuit of income will also drive the further growth of “fixed income +” and the two factors will jointly push up the demand for convertible bonds. It is estimated that the net supply of convertible bonds in 2022 is equivalent to that in 2021, while the demand will continue to grow rapidly, and the pattern of short supply may continue to exist.
(source: 21st Century Business Herald)
