Reflections on the development of private placemen

Reflections on the development of private placement debt of small and medium-sized enterprises in China

in May 2012, China launched private placement debt of small and medium-sized enterprises, aiming to expand the financing channels of small and medium-sized enterprises in China and promote the further expansion of financing scale. After nearly two years of practice, the development of private placement debt of small and medium-sized enterprises is facing many practical problems. Based on this, this paper puts forward five suggestions. In May, 2012, China launched private placement bonds for small and medium-sized enterprises, aiming to expand the financing channels of small and medium-sized enterprises and promote the further expansion of financing scale. After nearly two years of practice, the development of private placement debt of small and medium-sized enterprises is facing many practical problems: the financing cost is high, and the enthusiasm of enterprises to issue debt is not high; High risk, poor liquidity, investors lack enthusiasm; The issuance scale is small, the profit is low, and the enthusiasm of securities companies is not high; The construction of government policy system needs to be improved and optimized. Based on this, the small and medium-sized enterprise Research Institute of CCID think tank put forward five suggestions with the further implementation of the "made in China 2025" plan: strengthen government financial support and promote the development of private debt; Strengthen policy publicity services and build a docking platform for enterprise securities companies; Improve the guarantee and credit reporting system and enhance market recognition; Strengthen the innovation of financial model and reduce the level of risk; Improve the mechanism design and improve the bond policy

main characteristics of the development of private placement bonds of small and medium-sized enterprises

(I) the total issuance volume is not high, and the issuance rhythm fluctuates greatly

as of February 24, 2014, according to incomplete statistics of wind, a total of 334 private placement bonds of small and medium-sized enterprises have been issued, with an issuance scale of about 40.533 billion yuan. Its characteristic is that the overall issuance rhythm is unstable, with obvious fluctuations, which has experienced a process of first rising, then falling, and then gradually rising. From June 2012 to January 2013, the issuance scale gradually increased. In January 2013, it reached a maximum of 30 in a single month, and then gradually decreased. In July 2013, only 11 were issued, and then gradually increased

(II) the issuance scale of a single bond is small, mostly at 200million yuan. Jiao Hongwen, Secretary General of the special committee, presided over the technical exchange meeting.

through statistical analysis, among the 334 private placement bonds of small and medium-sized enterprises, the largest issuance scale reaches 500million yuan, and the smallest issuance scale is only 5million yuan. From the distribution of issuance scale, there are more than 140 bonds with a scale of less than 100million yuan, 56 bonds with a scale of 100million yuan, 90 bonds with a scale of 100million yuan and 200million yuan (including 200million yuan), and 40 bonds with a scale of more than 200million yuan. On the whole, the issuance scale of private placement bonds is relatively average and small, most of which are less than 200million yuan

(III) high requirements for credit enhancement, with more special terms and guarantee measures

among 334 private placement bonds of small and medium-sized enterprises, more than 200 have special terms, close to more than 60% of the total issuance. The content of the terms is mainly about selling back and adjusting the coupon rate, which is about 140. Other special terms include directional transfer, redemption, early repayment of bonds and other special terms. In terms of credit enhancement measures, a total of about 240 private placement bond issuers have established different forms of guarantees, accounting for more than 70% of the total issuance, most of which are irrevocable joint and several guarantees

(IV) there are a large number of filings, but the success rate of issuance is not high

as of the end of June 2013, the total number of filings of private placement bonds of small and medium-sized enterprises nationwide is 311, including 154 on the Shanghai Stock Exchange and 157 on the Shenzhen Stock Exchange; The total filing amount is 41.37 billion yuan, including 20.34 billion yuan for Shanghai Stock Exchange and 21.03 billion yuan for Shenzhen Stock Exchange. In the same period, the total issuance amount nationwide was 26.99 billion yuan, including 14.88 billion yuan in Shanghai Stock Exchange and 12.11 billion yuan in Shenzhen Stock Exchange. In terms of the success rate of issuance, the total issuance amount nationwide accounts for 65.2% of the total filing amount, and the overall success rate of filing issuance is not high. Specifically, the success rate of issuance of Shanghai Stock Exchange is slightly higher, up to 73.2%; The issuance success rate of Shenzhen stock exchange is low, only 57.6%

prominent problems of private placement bonds of small and medium-sized enterprises

(I) high financing costs and low enthusiasm of small and medium-sized enterprises to issue bonds

at present, the nominal interest rate of private placement bonds issued by small and medium-sized enterprises in China is mostly between 8.5% and 10%, plus the guarantee fee, underwriting fee, audit fee, lawyer fee, rating fee and other intermediary service fees in the issuance process, the actual issuance interest rate is about 14% and 17%. The financing cost is much higher than that of bank financing, small business trust and other products. For small and medium-sized enterprises engaged in general industrial development, too high financing costs are undoubtedly a heavy financial burden, which seriously restricts their enthusiasm to issue bonds

(II) high risk, poor liquidity, lack of enthusiasm of investors

first, small and medium-sized enterprises have low operational transparency, incomplete information disclosure, non-standard governance structure, strong industrial dependence, and are vulnerable to macroeconomic fluctuations, resulting in high default risk of private placement bonds and low enthusiasm of investors to subscribe. Second, private placement bonds of small and medium-sized enterprises can only be listed and traded on the fixed income platform of Shanghai Stock Exchange and the comprehensive agreement platform of Shenzhen Stock Exchange, or transferred over the counter in securities companies, which limits their liquidity to a certain extent. Third, the private placement bond market is immature, lacking risk mitigation tools and financial derivatives to hedge risks, which makes it difficult to reduce the risk of private placement bonds and enhance liquidity, which also leads to low investor enthusiasm

(III) the issuance scale is small, the profit is low, and the enthusiasm of the Underwriters is not high

at present, the private placement bonds of small and medium-sized enterprises that have been issued are small, most of which are not more than 200million yuan. The Underwriters generally charge an underwriting fee of no more than 1.5%. Clearing method: please check whether the selection of the controller in the joint setting is the appropriate deduction of costs, and the underwriting income is very limited; In addition, the enthusiasm of investors to subscribe is not very high, resulting in the low enthusiasm of underwriters to issue. Due to the high risk of private placement bonds of small and medium-sized enterprises, the Underwriters may become the actual undertaker of default, that is, the last bearer of default in fact. Therefore, few securities chambers of Commerce specialize in the development of private debt business, and private debt of small and medium-sized enterprises is becoming a chicken rib in the eyes of securities companies, basically serving customers who are ready for IPO

(IV) the construction of government policy system needs to be improved and optimized

at present, some pilot areas of private placement of small and medium-sized enterprises have successively issued support policies. For example, provide discount interest for bond issuing enterprises, and try to subsidize intermediary institutions. Although government subsidies have reduced the cost of issuing bonds and increased the enthusiasm of enterprises, with the increase of the number of bonds issued, local fiscal pressure will increase, which is likely to affect the sustainability of policy implementation. Therefore, it is necessary to explore and study the innovation of financial support methods

in addition, in terms of the trading mechanism of private placement bonds, the innovation of financial derivatives, the innovation of risk mitigation tools, and the construction of guarantee and credit system, policies and measures also need to be continuously improved and optimized to reduce risks, improve liquidity, and improve the enthusiasm of all parties to participate

policy suggestions for the development of private placement debt of small and medium-sized enterprises

(I) strengthen government financial support and promote the development of private placement debt

first, appropriately increase financial subsidies. All localities should expand the scope of policy subsidies and implement financial interest discounts for all small and medium-sized enterprises that issue bonds. Explore the use of a variety of financial means to promote the development of private debt of small and medium-sized enterprises, appropriately reduce the tax of bond issuing enterprises, and reduce the comprehensive burden of bond issuing enterprises; Explore the forms of financial incentives for securities companies and improve their enthusiasm for underwriting; Reduce or exempt the coupon interest income tax of private placement bonds and encourage investors' enthusiasm. The second is to study the establishment of government guidance funds to improve the success rate of private placement bond issuance. Encourage the establishment of a private placement bond development guidance fund for small and medium-sized enterprises, set up a fund with financial contribution, and subscribe for 10% to 20% of the issuance scale. Through the fund purchase behavior, give play to the demonstration effect and leverage effect, enhance the subscription enthusiasm of social institutional investors, and improve the issuance scale and success rate. Third, we should study and prepare to establish a support guarantee fund to appropriately mitigate the repayment risk. We can study and establish a support and guarantee fund for private placement bonds of small and medium-sized enterprises, provide joint and several guarantees, limited balance cashing and other support for private placement bonds of small and medium-sized enterprises, and appropriately mitigate the repayment risk

(II) strengthen policy publicity services and build a docking platform for enterprise securities companies

first, strengthen publicity and timely transmit information. The government should pass the information of private placement debt to small and medium-sized enterprises through stations, print media, brochures, activity training and other channels, introduce the nature of private placement debt, clarify the advantages of private placement debt, disclose the issuance of private placement debt, explain the relevant preferential policies of private placement debt, etc., so that more small and medium-sized enterprises can know, understand, recognize, accept private placement debt, and know the relevant support policies in time. Second, strengthen guidance and build a docking platform for enterprise securities companies. It is suggested that the government should take the lead to build a platform to help securities companies choose enterprises with excellent conditions and improve the enthusiasm of enterprises to issue bonds. Adopt classified guidance and support, and explore industrial collective bond issuance. Classify small and medium-sized enterprises in key development industries, support enterprises in a certain industry to issue bonds collectively, give full play to the demonstration effect, and realize the development trend of private placement debt from point to area

(III) improve the guarantee and credit reporting system, enhance market recognition

optimize the existing guarantee mechanism. First, encourage government funded guarantee companies to strengthen business innovation and actively provide guarantee support for private placement bonds of small and medium-sized enterprises. Give full play to the role of government policy guarantee companies to provide re guarantee for guarantee companies serving private placement bonds of small and medium-sized enterprises. Second, state-owned enterprises and guarantee institutions that provide guarantee services for private placement bonds of small and medium-sized enterprises should be given appropriate risk compensation, tax relief or financial discount to improve their enthusiasm for participation. Third, encourage guarantee companies to appropriately expand the scope of recognition of counter collateral. Most guarantee companies recognize real estate and land as counter collateral, and encourage guarantee companies to include equity mortgage and accounts receivable into the scope of recognition

improve the credit enhancement system. First, explore the diversification of credit enhancement methods. At present, the mainstream way of credit enhancement in the domestic market is still the traditional third-party guarantee and mortgage guarantee, and there are also attempts to convert shares and some guarantee clauses, but the number of applications is very small. It is suggested to explore new ways to increase credit in the development of private placement bond market, such as bond insurance, credit reserve, right clauses, partial proportion guarantee, etc. The second is to explore the establishment of a private placement bond credit reporting system for small and medium-sized enterprises, fully integrate the credit information of banks, industry and commerce, taxation, customs and finance departments, establish a detailed private placement bond small and medium-sized enterprise database, and systematically record the credit status of private placement bond issuing Enterprises

(IV) strengthen the innovation of financial model and reduce the risk level

explore the innovation of financial derivatives and the hierarchical design of bond products. At present, there is still a lack of practice in the application of financial derivatives and financial risk mitigation tools in the private placement bond market in China. Therefore, we can actively promote the innovation of derivatives such as credit default swaps and guaranteed debt instruments, and effectively transfer and hedge credit risks; Create credit risk mitigation contracts (CRMA) and credit risk mitigation vouchers (crmw) to realize the pricing, hedging and transfer of private debt risks. Through the innovation of financial instruments, we can mitigate the risk of private placement bonds of small and medium-sized enterprises, and improve the issuance scale of the primary issuance market and the liquidity of the secondary trading market. According to investors' different levels of risk preference, securities companies can design private placement bond products at many levels, such as priority, middle and inferior, to meet the investment needs of investors with different levels of risk preference and expand the range of investors

introduce compulsory redemption and convertible bond mechanism. Explore and set mandatory enterprises under specific trigger events