Steven Chen and Chubo Chen
Jin Mao PRC Lawyers
ukzychen@jinmao.com.cn; chubochen@jinmao.com.cn

On March 21 2011, Shanghai International Port (Group) (SIPG) obtained the approval to issue corporate bonds to the amount of Rmb5 billion, less than two weeks after its application had been filed with China Securities Regulatory Commission (CSRC). Additionally, SIPG was made the first beneficiary to benefit from the efficiency of the CSRC’s “Green Channel” for its review and approval procedure for corporate bonds. SIPG will use the proceeds to replenish its working capital, optimise debt structure and repay its debt.

Through the so-called “Green Channel”, as part of the CSRC’s reform on its corporate bonds issuance examination system, the regulator is to review and approve, under fast-track rules, the issuance as proposed by issuers with net assets above Rmb10 billion or those with an AAA credit rating. Prior to the reform, the Measures for Pilot Projects for the Offering of Corporate Bonds as promulgated by the CSRC in August 2007 had been applied. Under this old rule, corporate bonds issuers had to “queue up in the hall of the Issuance Examination Committee with the IPO [initial public offering]”. According to an industry insider, “now the lines are diverged, and the process has been rapidly accelerated”.

Representing SIPG, Jin Mao PRC Lawyers (Jin Mao) provided the full-cycle legal service for the corporate bonds issuance. Partner Steven Chen and Maggie Han of Jin Mao were “deeply impressed” by the speed. These two attorneys are also the legal advisors of another major financing project of SIPG, the private placement of A-shares to Tongsheng Investment Group and the acquisition of the assets of Yangshan Deep Water Port. The private placement project is actually proceeding rapidly, but in contrast to the fact that it took no more than one month for SIPG to attain the approval after the corporate bonds issuance project had been launched, it can be considered behind schedule. (SIPG’s private placement project passed the exam of Issuance Examination Committee on February 25 2011, and is expected to be granted approval in early April.)

Another element of SIPG’s corporate bonds issuance this time was the interest rate of the issuance. Having witnessed the whole process of the issuance and bookkeeping, the attorneys of Jin Mao describe the inquiry about interest rates as extraordinarily “gelivable”, or exciting and empowering. Under the 3+2 mode of maturity for SIPG’s corporate bonds issuance, the rate for the first three years is just 4.69% which was reached through an inquiry to institutional investors, while the referential rate for medium-term notes (three-year) as publicised by the China Interbank Market one day before (March 28 2011) was 4.88%. Therefore, even though more charges (for example, fees for publication by appointed media and for securities registration) would arise from the issuance of corporate bonds than from that of medium-term notes, listing companies can very easily be tempted into issuing the former.

Soliciting a professional legal opinion from experienced lawyers is an integral part of the application for a corporate bonds issuance. Hopefully the lawyers participating in the issuance will be able to gain “fast monies” – or more business - just as the listing companies will be accorded “fast monies” through application utilising the “Green Channel”.