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Discussion on the refinancing and facilities

Author: XiongWei From: www.yourpaper.net Posted: 2010-02-20 18:44:14 Read:

Paper Keywords: listed companies; refinancing; facilities; case studies

Abstract:
Recently many listed companies by refinancing to the market to raise funds, the amount of days by China Ping An analysis refinancing plan, refinancing of listed companies as well as facilities to explore, and gives the relevant recommendations.



literature review

The economists Myers and Majiluf (1984) proposed capital structure of the financing order hypothesis, the theory that the operators understand the business more than corporate investors, and business owners are always trying to present shareholders rather than new shareholders to seek to maximize the value, Therefore, if the business is in good condition, investment projects promising, operators prefer debt financing and the use of financial leverage positive effect on profit, rather than equity financing to high income divided up by outsiders.
Different characteristics of foreign financing of listed companies, listed companies in China generally preferred equity financing to raise funds. The largest shareholder with a strong equity refinancing preference, from the exploitation of minority shareholders. Shaoan Huang and Zhang Gang (2001) studied equity financing preference of listed companies in China, found that the cost of financing, institutional factors such as the listed companies prefer equity financing. The Li Kang et al (2003) that the holding position of state-owned shares of listed companies is only the shadow of the large shareholders, major shareholders can benefit from the equity financing and preferred equity financing. Lu Zhengfei, and Ye Kangtao (2004) studies have shown that although the average cost of equity financing of listed companies in China is less than the cost of debt financing, but this does not fully explain the preferences for equity financing behavior of listed companies in China, and also may be subject to the risk of bankruptcy, debt capacity constraints , agency costs and corporate control over factors, the scale of corporate capital and free cash flow is the lower, the higher the return on net assets and controlling shareholder equity ratio, the company is more likely to choose equity financing.

2 Case Review

China Ping An Insurance (Group) Co., Ltd. (hereinafter referred to as "peace") was founded in 1988 and headquartered in Shenzhen. The China Ping Holdings establishment of China Ping An Life Insurance Company Limited, China Ping An Property Insurance Co., Ltd., China Ping An Insurance Overseas (Holdings) Company, Ping An Trust & Investment Co., Ltd. and controlling. Ping An Trust in accordance with the law controlling the Ping An Bank Co., Ltd., Ping An Securities Co., Ltd., Ping An of China formed its core insurance operations, covering securities, trust, bank a highly efficient and diversified financial services group. June 2004 about China Ping An Insurance (Group) Co., Ltd. initial public offering of shares in the Main Board of the Stock Exchange of Hong Kong officially listed for trading, company shares the name "Ping An of China", stock code 2318 and March 2007, China Ping An Insurance ( Group) Co., Ltd. initial public offering of A shares listed on the Shanghai Securities Exchange, the company shares the name "Ping An of China", stock code 601318.
A-share listed nearly a year, China Ping An open again financing "valve", proposed public issuance of not more than 1.2 billion shares, while the proposed issuance of convertible bonds does not exceed 412 billion yuan.
January 21, 2008, Ping An of China announced that, in order to adapt to the financial sector is fully open and the need for the rapid development of the insurance business, and further enhance the strength of the company, to provide capital support for the rapid development of business, the company intends to apply for the issue of A shares. Based on additional programs, China Ping An intends to non-specific public offering of 12 million shares of A shares, the issue price of not less than 20 trading days before the prospectus announcement stock price or trading days before the stock price . Announcement the previous day's closing price of 98.21 yuan, China Ping An, China Ping An open additional amount of money raised will reach about 117.8 billion yuan, plus 41.2 billion separate amount of debt fund-raising, the size of the refinancing will be close to 160 billion yuan .
February 28, 2008, media reported that the State Administration of Taxation, China Ping tax audit Ping 100 billion refinancing plan until July. China Ping An, Deputy General Manager and Chief Insurance Business Officer at the date Leung Ka Kui Johnny said, the State Administration of Taxation of China Ping tax audit is not aimed at refinancing plan, nor will refinancing plan impact.
March 5, 2008, the shareholders' meeting of China Ping An, the questioning and dissatisfaction with the sound of thousands of small investors, have no doubt that overwhelmingly approved the motion submitted by the Board of Directors financing.
May 8, 2008, China Ping An announcement that the application submitted to the refinancing of A shares within the next six months will not be considered.
Since then, the sensation of peace high finance event was temporarily paragraphs. But along with many of the problems worth thinking.

3 Case Analysis

China Ping An announcement refinancing program, the response of the various sectors of the community and its strong, which are mainly concentrated in the facilities: First, China Ping An A-share listing in March last year, the financing of $ 400 million; listed less than year, the company did not give investors a substantial return on the case, it is surprising to throw "astronomical" financing plan, refinancing scale of 160 billion yuan, equivalent to the 2007 A-share market IPO financing total 1/3, does make the market and investors was "too much". Ping An of China more than a thousand billion huge refinancing behavior, the Finance and Securities Research Institute of Renmin University of China Professor Wu Xiaoqiu excited to make: "This is an almost irrational financing, almost crazy expansion, so that ordinary people understand nothing ! "
China Ping An refinancing announcement, detailed disclosure on the use of funds did not, but said the investment projects will be used to replenish capital, working capital, and the relevant regulatory authorities. Such a large scale of financing, but specific projects is unknown, simply try to call you money, it is no wonder that will make investors objectionable. Make even more investors worried other listed companies to follow the example of China Ping An, have "astronomical" financing, the stock market will become a listed company "misappropriating" tool? Safely today to raise 160 billion yuan, tomorrow ICBC Life raised 200 billion, and that the evidence of Chinese market not collapsed yet?
First of all, the refinancing of listed companies is very casual behavior. Refinancing as a specification, the refinancing of listed companies should be raised only in the case of exact capital requirements for investment projects. China Ping An refinancing is clearly not the case. Not only did not determine the investment projects, funding needs identified, even the end do not need to refinance, are also uncertain. Peace in the day on January 21 this year, the amount of refinancing to May 8 this year, but stopped refinancing, but only to 400 million convertible bonds issued to leave a posterior. Therefore, peace in the end do not need to refinance, how much money to finance, are arbitrary.
Second, the amount of financing is not linked to the return on investment, and highlights the stock market re-financing of the financing system, the light returns. In recent years, management has been stressed that the positive profit distribution policy, to change the listed companies re-financing, the light returns situation. However, the combination can best embody the listed companies re-financing, the light returns refinancing issue, the management but open the door, let the listed companies to open sea financing, rather than the financing of listed companies to give investors a return together. Because of this hook, as well as China Ping listed for less than a year on the open sea, launched 16 billion refinancing program out.
[JP3], the refinancing system has not been effectively implemented. Like China Ping An refinancing, because there is no clear fund-raising purposes, coupled with the company listed on the reasons for less than three years, introduced in 2006, the securities of listed companies release management did not meet the requirements. But is such a originally not comply with our policy refinancing plan, the management of the stock market has turned a blind eye and allow it to exist for a long time, this phenomenon is very normal, obvious violation of the refinancing policy. [JP]

conclusions and recommendations

First, the rules are designed to be refined. Refinancing at the system level, the lack of relevant regulations and restrictions. Although there are now restrictions on the proportion of financing, but in the time interval between refinancing and financing behavior of refinancing amount the lack of limitations. Such as specific provisions: Under normal circumstances, an interval of at least three years between the two financing; no clear significant funding plan, refinancing may not exceed the amount of the size of the IPO.
Second, the examination and approval system to be perfect. IPO approval in China has always been very strict, but the approval of the refinancing must be strict, taking into account the financing behavior and the market will bear. Issuance of such a large scale, in the A-share market the shareholders reap gains in the H-share market, for the holders of A shares in itself is not fair.
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