SSE Notice of Matters Concerning Launching Pilot Program for Public Issuance of Short-Term Corporate Bonds
Shang Zheng Fa [2020] No. 40 Document
All market participants:
In order to further broaden the financing channels for companies, reduce financing costs and meet the demand of companies for liquidity management, in accordance with the laws and regulations such as the Securities Law and the Measures for the Administration of Issuance and Trading of Corporate Bonds as well as the relevant business rules of the Shanghai Stock Exchange (SSE), the matters regarding the launch of the pilot program for the public issuance of short-term corporate bonds are hereby notified as follows:
1. An issuer who applies for the public issuance of short-term corporate bonds and the listing of them on the SSE shall have adequate short-term solvency. During the period of the pilot program, the short-term corporate bonds are only publicly issued to professional investors, and the scope of the pilot program shall fall into one of the following circumstances:
(1) The SSE’s regulatory arrangements for financing optimization through corporate bonds shall be applicable, and the issuer's average net cash flow from operating activities in the past three years shall be positive or the quick ratio at the latest end of the year shall be more than 1;
(2) It shall be a securities company with strong comprehensive strength and well-developed internal control and risk control systems;
(3) There are other circumstances approved by the SSE.
According to the development of the pilot program, the SSE will adjust the scope of the pilot program for the public issuance of short-term corporate bonds in a timely manner.
2. The term for the publicly issued short-term corporate bonds shall be 1 year or less, and the specific term shall be determined by the issuer according to the capital demands for production and operation and the market conditions.
3. An issuer applying for public issuance of short-term corporate bonds may prepare separate application documents and make an application separately, or it may prepare a unified application document including the general corporate bonds of other terms and make a collective application.
Public issuance of short-term corporate bonds is subject to balance management. During the period of validity of the registration document, the issuer's outstanding balance of publicly issued short-term corporate bonds shall not exceed the registered size. On the premise of meeting the abovementioned requirements, the issuer can independently determine the times of the issuance and the size of each issuance.
When the public issuance of short-term corporate bonds is included in a collective application, the size of the short-term corporate bond to be applied shall be specified in the prospectus.
4. The application documents for the public issuance of short-term corporate bonds shall be subject to the current rules for the public issuance of corporate bonds. The issuer shall go through a corporate credit rating and at the same time may choose whether to go through a bond credit rating at their discretion.
5. The purpose of the funds raised from the short-term corporate bond should be reasonably matched with the term of the bond, and the funds raised shall be restricted to the repayment of debts due within one year or the replenishment of working capital, and shall not be used for long-term investment needs. The issuer shall disclose the specific purposes for the raised funds in the prospectus and reasonably explain the financing needs. For the replenishment of working capital, it is necessary to roughly estimate the working capital gap and provide evidence in the application document.
The issuer shall strengthen cash management, improve the internal control system, and disclose the internal control system for capital operation, the modes of fund management and operation, the contingency plan for short-term fund scheduling and other information in the prospectus for public issuance of short-term corporate bonds.
6. An issuer who makes the public offering of short-term corporate bonds for the first time within the validity period of the registration document shall complete the pre-issuance filing procedures with the SSE. After the first public offering, if there are no updates on financial data or major subsequent events within the validity period the registration document, the issuer and the book-runner may carry out the issuance directly after the publication of relevant offering documents.
7. When the issuer conducts follow-on public issuance of short-term corporate bonds within the validity period of the registration document, if there are no major adverse changes in the issuer's business and financial conditions or matters that have a significant impact on solvency, the issuer may properly simplify the content disclosed in the prospectus such as the basic situation and the financial and accounting information, and other elements may be disclosed by indexing them to the prospectus for the first public offering of short-term corporate bonds. The simplified content of information disclosure shall include at least the following elements:
(1) The balance sheet, profit statement, cash flow statement and major financial indicators table for the latest term;
(2) The reasons for material changes in major accounting data and financial indicators;
(3) The main components of the business revenue for the latest term.
8. Short-term corporate bonds whose issuer has a corporate credit rating of AA or above and in line with the provisions of Sections 2 to 4 of Article 1 of the Notice on Amending the ‘SSE Rules for Listing of Corporate Bonds’ can be traded through auction, quotation, inquiry and agreement, using multilateral net-amount settlement for cash trading. When the issuer's corporate credit rating is below AA (not inclusive), the adjustment to the trading modes of the publicly issued short-term corporate bonds and related matters shall be handled in accordance with the SSE’s Notice on the Matters Concerning the Adjustment to Trading Modes during the Listing of Bonds.
The short-term corporate bonds, whose issuer's corporate credit rating reach AAA (with no subordinate clauses or other relevant contract terms that affect the bond's credit rating), and using multilateral net-amount settlement, can be used as pledged bonds for bond collateralized repo.
9. For the corporate bonds that have obtained approval or registration documents before the publication of this notice, if they meet the relevant requirements for issuer's qualifications, information disclosure, etc. as stipulated in this notice and conform to the issuance application document, the arrangements for the issuance of the short-term corporate bonds may be determined at the pre-issuance filing stage.
10. The lead underwriters and the lawyers for issuers should be diligent and responsible, verify whether the issuer’s public issuance of short-term corporate bonds meets the scope of the pilot program and the information disclosure requirements, and issue verification opinions. The entrusted managers should supervise the issuer’s use of raised funds in accordance with rules and agreements.
11. The unsettled issues such as issuance and listing review as well as listing and trading of the publicly issued short-term corporate bonds shall be subject to the current rules of the SSE for corporate bonds.
12. Other provisions of the laws, the regulations, the China Securities Regulatory Commission, and the self-regulatory agencies on the balance of short-term financing instruments for securities companies shall be abided by.
13. This notice shall take effect as of the date of publication. If there are relevant provisions issued by the SSE previously that are inconsistent with this notice, this notice shall prevail.
Shanghai Stock Exchange
May 21, 2020