Bankruptcy Reorganization Of The Controlled Shareholder Hinders The Audit Of Corporate Bonds Of Founder Securities, And "No Return" Of Bond Financing Within The Year

The debt of the controlling party or the bonds of the controlling party have become the obstacle to the company's default.

On November 3, the CSRC announced that it had examined the application document for public issuance of corporate bonds to qualified investors submitted by Founder Securities in accordance with the law, and decided to suspend the examination of the application for administrative license in accordance with the relevant provisions of Article 22 of the provisions on the implementation procedures of administrative license of China Securities Regulatory Commission.

It is rare for securities companies to suspend the audit of issuing corporate bonds. The last time similar situation occurred was in March 2019.

In this regard, some people close to Founder Securities said that the suspension of audit was requested by Founder Securities on its own initiative, or related to the company's controlling shareholder, Founder Group's debt serial default and in the process of restructuring.

Actively ask to suspend the examination of corporate bonds?

With reference to Article 22 of the provisions of the China Securities Regulatory Commission on the implementation of administrative licensing procedures, the suspension of the examination of listed companies includes: being investigated by the administrative organ for suspected violation of laws and regulations, or being investigated by the judicial organ, but the case has not been closed, which has a significant impact on its administrative licensing matters; the applicant has been subject to restrictions on business activities, ordered to suspend business for rectification by the CSRC in accordance with the law Other regulatory measures such as trusteeship, takeover and so on are designated. And "the applicant voluntarily requests to suspend the examination" is also one of the cases.

And the above-mentioned people close to Founder Securities put forward that "due to the problem of controlling shareholders, Founder Securities actively asked to suspend the audit" has also begun.

As early as January this year, when the CSRC gave feedback on the issuance of corporate bonds by Founder Securities, it showed concern about the debt default of Beijing Founder group, the controlling shareholder of the company. At that time, Peking University Founder group failed to timely honor the ultra short-term financing bonds "19 founder scp002".

The CSRC then asked Founder Securities to explain or disclose the latest judicial freeze on the shares held by Founder group of Peking University, as well as the impact on the corporate governance, business activities and solvency of the issuer; the related party transactions between Founder Securities and Founder group of Peking University and its related parties, as well as the impact on the solvency of the issuer.

"In fact, it is not so much Founder Securities's initiative to cancel the application, but rather the chief underwriter's request to suspend the audit," said an investment bank bond underwriter of a medium-sized domestic securities firm. Although the default of shareholders' debt does not affect the issuance of bonds by subsidiaries on the legal level, "it is negative in public opinion, and the whole group can't turn around, so the subsidiaries naturally have potential risks. At this time, it is quite natural for the lead underwriter to suspend the declaration of new projects. ".

According to financial report data, as of September 30, Founder group of Peking University was the controlling shareholder of Founder Securities, holding 2.285 billion shares, accounting for 27.75% of the company's total share capital, of which 1.11 billion shares were in the state of pledge or freezing.

On February 18, 2020, without any sign, Founder group of Peking University announced its application for bankruptcy and reorganization. After that, the court ruled that Founder group of Peking University and its four subsidiaries were substantially merged and reorganized.

At the same time of declaring bankruptcy and reorganization, the debt default of Founder group of Peking University also began to break out.

Previously, the reporter of the 21st century economic news learned exclusively that according to the amount of temporarily determined creditor's rights disclosed at the first creditors' meeting of Founder's substantive merger and reorganization on October 22, the amount of temporarily determined creditor's rights was 165.461 billion yuan. As for the declaration situation, as of October 9, 638 creditors of five companies including Peking University Founder have reported 649 claims to the administrator, with a total amount of 231.167 billion yuan.

On November 2, Founder group of Peking University just released the notice that the second phase of medium-term notes of the company in 2018 had not been paid in full and on schedule. It said that at present, the restructuring of the group was in progress. According to the legal provisions, individual repayment was not allowed, and the relevant medium-term notes could not pay interest in full on schedule.

Short term bond financing channels blocked

Perhaps the problem is that the holding company has no choice but to suspend the securities issuance. However, the short-term financing channel of the company may be blocked by the short-term financing.

According to public information, founder securities issued three corporate bonds in 2019, with a total amount of 4.66 billion yuan, and in 2018, it raised 5.64 billion yuan. Since 2020, Founder Securities has not successfully issued any bonds including short-term financing bonds and corporate bonds, and the proportion of long-term liabilities of the company has also decreased from 20.53% at the end of 2019 to 13.23% at the end of the third quarter of this year.

"Founder Securities received feedback from China Securities Regulatory Commission at the beginning of this year, and it has been nearly a year now, indicating that the company was planning to issue bonds at the end of last year, and it is not without financing demand." Said the underwriters of investment bank bonds.

While the issuance of bonds by Founder Securities was hindered, the issuance of bonds by other securities companies increased significantly. According to the data, in the first three quarters of 2020, securities companies issued 492.4 billion yuan of ordinary corporate bonds, an increase of 99% over the same period last year.

Sun Binbin, chief analyst of fixed income of Tianfeng securities, said that since 2018, the issuance scale of common bonds of securities companies has continued to increase significantly, especially since 2020, the issuance of bonds by securities companies has increased significantly. On the one hand, business development needs to supplement working capital and working capital; on the other hand, the public issuance of corporate bonds implements registration system and loose monetary policy to improve the market environment, which is also conducive to low-cost direct financing for securities companies.

From the stock bonds, as of the end of September 2020, there were 737 securities company bonds in the market, involving 77 bond issuers, with a total scale of 1724.1 billion yuan and maturity of 235.2 billion yuan within the year. Among them, there are 509 ordinary bonds of securities companies, with a scale of 1281 billion yuan, mainly concentrated in head brokers.

Sun Binbin pointed out that before 2023, securities companies were facing large-scale bond maturities every year. In recent years, the business model of securities companies has gradually become "asset heavy", which enhances the power of securities companies to accelerate business expansion by supplementing capital. This is expected to push up the growth of bond issuance scale of securities companies.

"This year is also a big year for securities companies to" invigorate their blood ". Head brokers such as CITIC Securities have also launched a fixed increase. The overall fixed increase scale of the industry has exceeded 100 billion yuan." According to non bank analysts of securities companies in Beijing, all kinds of securities companies have a strong demand for capital driven businesses such as financing, pledge and investment, and small securities companies also have a need to reserve talents. "The alternative investment subsidiary related to the science and technology innovation board is also one of the main directions for securities companies to increase capital."

In this case, Founder Securities, which is hindered in issuing bonds for financing, is undoubtedly at a disadvantage at the beginning. The company will further expand its business and supplement its liquidity. In the short term, it may need to rely on refinancing to "replenish blood".

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