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Supposing theChina Securities Regulatory Commission(CSRC) only considers the corporate bond issuers each with net assets of over 1.5 billion yuan, eligible A-share and H-share issuers will have combined net assets of 9.3 trillion yuan, said CICC's Fixed Income Department in a report. The upper limit of total issuance will reach 3.2 trillion yuan theoretically, if these companies invest up to 40 percent of their net assets.
According to draft rules on corporate bond issuance published by CSRC, the total value of a company's outstanding bonds is required not to exceed 40 percent of its net assets, and the company's average annual distributable profits in the latest three accounting years should not be less than the bonds' one-year interest.
Requirements for corporate bond issuance are much looser than those of enterprise bonds and convertible bonds, and most of the listed companies could meet the criteria, noted the CICC report.
Durations of corporate bond issuance may be set between three to seven years, while that of enterprise bonds are usually 10 years or above. Corporate bond issuers may focus on short-term bonds to reduce costs and avoid direct competition with enterprise bonds, according to CICC.
The draft rules did not specify where corporate bonds should be listed. "It is possible for corporate bonds to be listed in the interbank market," said Xu Xiaoqing, an analyst with CICC's Fixed Income Department.
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