NAFMII Optimized Registration and Issuance Mechanism in Interbank Market to Strengthen Support for the Real Economy
Updated: Apr.17, 2020 Print

On April 16th, 2020, NAFMII released a revised set of self-regulatory rules, including two documents on private placement, which will be effective on July 1st this year.

The first private placement in debt financing instrument market was back in 2011. Compared with public offering, privately placed debt is welcomed by issuers for its relatively shorter issuance process, more flexibility in information disclosure and more space for meeting the individualistic needs of participants. By the end of this March, 2,212 issuers registered 8.31 trillion RMB non-public offering debt financing instruments with NAFMII. Accumulative issuance reached 5.49 trillion yuan, outstanding volume, 2.133 trillion yuan , taking up 17.6% of the total size of debt financing instruments market. Most of the privately placed instruments (hereinafter referred as PPN) are mid- and long-term debt, providing stable funding for issuers. As China’s bond market has made significant progress over the past few decades, both internal and external environment of bond market have evolved, raising new questions in the efficiency of registration and issuance of PPN as well in information disclosure.

NAFMII timely started revising the PPN registration and issuance procedures as well as information disclosure forms to meet the new market demand, The revision focuses on PPN registration, issuance, post-issuance management. The set of forms comprises 16 basic forms and 21 sub-forms, specific modifications are as following:

PPN issuers are categorized into the layer of matured issuers, the information disclosure, registration and issuance procedure of matured issuers issuing PPN were simplified, efficiency of issuance is therefore improved.

Recalibrate private placed prospectus and private placement agreement, simplify issuance documents and information disclosure. In terms of regular disclosure of financial information by PPN issuers, when issuing with non-public offering prospectus, issuers are required to submit audited financial report for recent two years and semi-annual accounting report; when using private placement agreement, issuers only need to provide audited financial report for recent past year.

Optimize information disclosure on the use of proceeds. Issuers belonging in the matured issuer layer, if register PPN separately, do not need to disclosure the use of proceeds and issuance terms. Other issuers need to disclose use of proceeds in their first issuance according to the requirements of the layer they are in. The revision expands the scope of use of proceeds, allowing issuers to service debt, supplement liquidity, invest in equity or use proceeds for assets acquisition, etc..

Improve risk prevention and investor protection mechanism. The revision dedicate a new chapter in prospectus for issuers illustrating important reminders to investors, issuers may explain their risks, key problems and investment actions in this chapter, which will help investors to evaluate associated risks. In the meantime, arrangements on bond trustee, risk and default resolution, proactive debt management are added to prospectus disclosure.

Revise and add sub-forms to improve information disclosure. Information disclosure forms for credit enhancement, perpetual note and major events were revised, while sub-forms for M&A note, self-disciplinary actions imposed upon issuers, bond trustee agreement, bond connect were added into the set.

Adjust Private Placement Agreement to highlight the simplification and convenience in issuers disclosing Private Placement Agreement rather than non-public offering prospectus.