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Holder Risk Geometry Bond Structured Release
China Securities Journal Wu Juanjuan
An institutional person, Wang Shu (pseudonym), recently suffered a bond default, which he believes is the "cause" of structured distribution.
According to industry insiders, once a structured bond is defaulted, due to the bundle of interests, issuers, underwriters, investors, etc. are likely to fall into the complicated relationship of continuous change and confusion. Uninformed investors believe that they have not been able to grasp this information at the time of issue, and they are deceived. This method of distribution has “original sin” to some extent; the issuer believes that this is an expedient for bond issuance under special circumstances. meter. Is the structured distribution an expedient measure for corporate finance or a distribution method with “original sin”? Under the premise of the development of the bond market, industry insiders said that it is worthwhile to find a middle way between protecting investors and supporting corporate financing.
"Explosive thunder" is not accidental
Wang Shu provided an agreement on the bond forward transaction to the China Securities Journal reporter. Under the agreement, S Agency sells its own bonds to its institution and agrees to buy the bonds back on the specified date, which is essentially a holding transaction. However, in the second half of 2018, the bond actually defaulted. According to the agreement, S institutions should buy back bonds. According to Wang Shu, S institutions have not yet bought bonds. Originally, this was just a single-generation transaction default. What made things complicated was whether the two sides had a structured issue of the single bond issue.
Wang said that the S-institutions traded the above-mentioned bond issuers' structured issuance projects, with a total holding scale of hundreds of millions. Most of them were temporarily stored in the accounts of other institutions through the holdings, and the S-institutions were not disclosed in the holding agreement. The relationship with the issuer.
Relevant persons of S institutions told China Securities Journal that they had not manipulated the issuer's structured issuance project. However, it is not known whether the issuer has organized a distribution with other agencies.
However, it said that it is more familiar with the issuer's management and has done some "promotion work" in the bond issuance process. There are a total of five investment institutions involved in the bond, and S agencies have exchanged equal or excess amounts for each. "If some institutions lack funds, I will help them introduce funds. One institution took about 8 million yuan of bonds, and he has a 20 million yuan bond to be processed. I will dock his 20 million yuan bond. The funds." He also said that investors are voluntarily buying, not that he forced the past, and some investors have gone to the local to do the best.
S agency specializes in transaction matching. Since bond trading is not a public transaction, industry insiders said that in the past few years, bond traders have queried and traded in various WeChat groups every day. This kind of transaction is inefficient, so it is one of the organizations that meet the needs of the parties. S is one of them, and it has certain recognition in the industry.
S institutional sources said that in the bond issuance process, it also helped the lead underwriters to "bookkeeping" in advance. Some of the lead underwriters may not be able to sell the amount they have taken over, in which case they help the lead underwriter to resolve a part, "this is very common in bond issuance." However, he stated that he did not cooperate with the issuer in structured issuance. However, Wang Shu does not recognize the statement of S-institutions. He believes that it is the structured issuance that puts him at a disadvantage in the holding transaction.
An industry insider commented on structured distribution: the subtlety of the whole thing is that the names of the positions in some institutional asset management products that have fallen to the bottom, and those that have not yet broken the contract but are also faltering are basically " Structured release" project. He believes that the probability of default in a "structured issuance" enterprise far exceeds the overall probability of the market, not accidental.
Zhang Xu, chief analyst of Everbright, pointed out that the funded supplier of structured issuance may regard the asset management products purchased by the issuer as a credit enhancement behavior, but in fact the amount purchased by the issuer cannot carry out the credit risk of the bond. Full coverage. Therefore, when the bond defaults, the fund provider may still suffer losses.
"mysterious" structured distribution
Even in the bond investment circle, structured distribution has a certain mystery. An industry insider bluntly said that the structured release could not be on the table, and the industry was somewhat indifferent.
The reporter learned that structured distribution is currently a more common form of distribution. On the one hand, since 2018, some enterprises have had difficulties in financing, and enterprises caught in financing difficulties have tried their best to raise funds. On the other hand, for brokers and private equity funds, these institutions are also eager to expand their business due to the shrinking of outsourcing business. In this case, the bond issuer and the asset management agency will hit it off.
To put it simply, structured issuance means that the issuer of the bond digests part of the bond by itself in various ways. The net financing amount of bond issuance is lower than the amount of bond issuance, and the actual payment cost may be higher than the coupon, which creates the illusion of optimistic financing. If the bonds are redeemed as scheduled, the structured issuance may not be noticed by the investors, and in the event of default or other risk events, due to the structured issuance method, the responsibilities of the parties are difficult to clarify, and they often fall into a state of mutual suspicion.
Zhang Xu once wrote that there are three ways to structure a distribution: the issuer purchases the flat layer of the asset management product, the issuer purchases the bond and pledges the financing, and the issuer purchases the inferior level of the asset management product. Take the model of “the inferior level of the issuer’s purchase of asset management products” as an example. For example, if the bond issuer purchases 600,000 yuan of the inferior level of structured asset management products, the manager of the asset management product will re-market the priority of 400 million. Yuan, two parts of the funds (1 billion yuan) in the primary market to buy the issuer's bonds of 700 million yuan, the ultimate bond issuer to obtain 100 million yuan of net financing, the asset management product manager increased the scale of 1 billion yuan. It is worth noting that among them, the issuer’s net financing amount of 100 million yuan is much lower than the bond issuance quota (more than 700 million yuan). Among the asset management product managers and bond issuers, one increased the size of the asset management product, and one successfully issued bonds to achieve a “win-win”.
In practice, the above several methods are often tied together. A brokerage dealer introduced that a composite model of the first and third combination is more common. "If the issuer wants to issue a debt of 1 billion yuan, the issuer will give the brokerage company 500 million yuan in cash, and the brokerage firm will set up a capital management plan. The securities business will invest 500 million yuan in debt, and then put the 500 million yuan. The yuan’s bond pledge went out and continued to buy the issuer’s debt with the money pledge.”
These models have the same goal: the issuer digests a portion of the bonds. When corporate financing was difficult in 2018, many companies adopted a structured distribution model. The above-mentioned securities dealers said that “this is understandable. Some issuers with no qualifications were not able to issue debts at the time. In order to break the dilemma, they had to take expediency measures.” However, he said that for some small and medium investors They may buy without knowing it. "This is not fair." When the brokerage is pledged, it will not be clear that this is a structured bond issue. It is also unfair to the counterparty of the pledge repurchase. These problems are exposed when the bond defaults.
In addition, if the issuer purchases itself and then uses the bond pledge financing, in the process of pledge financing, the fund supplier may think that it is conducting a low-risk fund transaction, but the essence of this transaction mode is the bond issuer. Bond pledge financing is used instead of bond issuance financing. Once the bond issuer's capital chain breaks, it may default in the repurchase financing, and then default on the bond redemption. At this time, the fund supply party can not recover the funds that are melted through the repurchase, and cannot rely on the disposal of the pledge to obtain enough. Compensation.
All in all, once he is involved in structured issuance, investors can easily underestimate the risk of participating in the transaction without their knowledge. The aforementioned brokerage asset management also said that it is not a good financing method because it can provide “money” financing for enterprises. In structured issuance, uninformed investors are at a disadvantage of information and their interests are not protected as they should be. This bond issuance model is problematic.
Some institutional sources believe that structured distribution has certain rationality. First, it is difficult to distinguish between normal distribution and structured distribution, so this approach cannot be banned. However, some institutional sources believe that under this type of issuance, the interests of some investors cannot be guaranteed, so there is "original sin."
A well-known bond investment fund manager said that the bond investment market is not a retail-oriented market, and issuers do not need to disclose information about all holders. This market information is not transparent. Structured distribution is difficult to define. The issuer finds a “clean account” to buy his own debt to achieve the purpose of successful issuance. It is difficult to define what constitutes a structured issue and under what circumstances. He said that some issuers have no choice but to adopt a structured issue without other means of financing, as long as it follows the corresponding disclosure requirements.
Wang Yizhi, general manager of Raman Assets, also said that structured distribution and normal issuance are difficult to distinguish, and it is only based on experience to speculate which issuers have adopted structured distribution. In advance, the credit investigation personnel of financial institutions will communicate with the issuer and the underwriting agency during the roadshow stage to find out the intention of structured distribution. In the event, when the bond is structured, the bid multiple and the effective margin multiplier can be used to roughly determine whether it is a structured issue. Afterwards, in the secondary market, it can be seen through the price whether there is a structured release.
Wang Yizhi believes that the self-discipline bottom line of participating institutions should be raised. At the same time, the development and construction of small and medium-sized financial institutions and private financial institutions should be strengthened, and institutions with different risk preferences should be encouraged to invest in products with different risk preferences.
Zhang Xu said that on the one hand, structured distribution can guarantee the issuance of bonds, increase the apparent circulation, and not waste the amount of approval; on the other hand, it also reduces the issuer's apparent coupon rate. The increase in apparent circulation and the reduction in apparent coupon rates are conducive to guiding the market to restore confidence in the issuer (and even such issuers), which is particularly important in the current environment.
Zhang Xu believes that for investors, it is necessary to strictly determine the warehousing and concentration ratio according to the qualification of the bond itself, and not consider the invalid credit enhancement method. In the bond reverse repo business, the pledge of the bond pledge library and the investment treasury should be unified, and the warehousing standard should be strictly in accordance with the same standard as the current vouchers.
The reporter learned that the current regulatory agencies are conducting a comprehensive inspection of the bond investment of securities firms, and the credit risk of bond investment is the focus of supervision. An industry insider expects structured distribution to become a regulatory focus. Issuers and related institutions need to enhance self-discipline, and investment institutions need to improve their research and skills.
Editor in charge: Fu Jianqing RF13564
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