Multiple securities firms are raising large amounts of funds through financing. Why are they rushing to issue bonds in the new year? The interest rates, scale, and subscription multiples are all noteworthy.

In recent days, the announcements of brokerage firms issuing bonds for financing have been noticeably frequent! Just looking at the situation on the Shanghai Stock Exchange, there are at least four brokerage firms, including CMSC (corporate bonds, planning to issue up to 20 billion RMB), Datong Securities (short-term corporate bonds, up to 700 million RMB), EB SECURITIES (corporate bonds, up to 10 billion RMB), and Guotai Junan Securities (corporate bonds, planning to issue up to 20 billion RMB), that have received feedback or acceptance from the exchange for non-publicly issuing bonds to professional investors. Except for CMSC which is issuing bonds due in 2024, the other three are issuing bonds due in 2025, with the announcement dates concentrated in early January 2025. The issuance amounts for the private placements are generally between 10 billion and 20 billion RMB. Looking at the Shenzhen Stock Exchange, there are mainly public bond issuances. Companies like Northeast (planned issue of up to 2 billion RMB), Western (planned issue of up to 1 billion RMB), First Capital Securities (planned issue of up to 1.5 billion RMB, finally issued 800 million RMB) have either disclosed the interest rates for their 2025 corporate bonds or revealed the issuance results on January 9th. Additionally, Western (002673.SZ) has extended the bookbuilding time for its issuance of corporate bonds for professional investors due in 2025 (first tranche) to January 9th. Changjiang's announcement of the face value interest rates for its issuance of subordinated perpetual bonds for professional investors due in 2025 (first tranche) was published on January 8th. Currently, Xiangcai Co.,Ltd (600095.SH) and Galaxy Securities have successfully issued their 2024 private placement bonds. According to the information on the Shanghai Stock Exchange official website on January 9th, Xiangcai Co.,Ltd successfully issued the first tranche of its non-publicly issued corporate bonds for professional investors due in 2025, with the bond abbreviated as 25Xiang Zhai 01, a subject rating of AA+, a total issuance of 3.4 billion RMB, a maturity period of 2+1+1 years, a face value interest rate of 3.5%, and an overall subscription multiple of 3.4 times. Furthermore, Galaxy Securities announced on January 9th that the issuance of the first tranche of its non-publicly issued corporate bonds to professional investors due in 2025 had been completed. The actual issuance size for this tranche one is 1.5 billion RMB, with a final face value interest rate of 1.72% and a subscription multiple of 2.93 times; the actual issuance size for this tranche two is 2.5 billion RMB, with a final face value interest rate of 1.75% and a subscription multiple of 2.44 times. Market interest rates being low, the cost of corporate bond financing becoming more reasonable Firstly, looking at the reasons behind the recent concentration of brokerage firms issuing bonds, based on a comprehensive view of the reporter's interviews, it is primarily due to the relative tightness of investment institutions' positions at the end of December 2024, and the relatively relaxed liquidity situation after the New Year, with market interest rates being low and the cost of corporate bond financing becoming more reasonable. Therefore, brokerage firms are seizing the opportunity to issue bonds for financing. Regarding the issuance situation, Xiangcai Co.,Ltd successfully surpassed the lower limit of the issuance interest rate range and received oversubscription, with an overall subscription multiple of 3.4 times. Industry experts believe that this indicates a high level of investor recognition for the bond, reflecting Xiangcai Co.,Ltd's full affirmation in the bond market. It is worth mentioning that prior to the successful issuance of Xiangcai Co.,Ltd's private placement bonds, the company introduced a state-owned shareholder. In July 2024, the third largest shareholder of Xiangcai Co.,Ltd with 17.5% of the share capital, Caishang Industrial, was converted into a wholly-owned subsidiary of Zhejiang Merchants Asset, and therefore, Xiangcai Co.,Ltd introduced a state-owned shareholder Zhejiang Merchants Asset. Additionally, in September of the same year, at the seventh meeting of the tenth board of directors of Xiangcai Co.,Ltd, Chen Jian was elected as the chairman of the tenth board of directors. From his resume, Chen Jian is the deputy general manager of Zhejiang Merchants Asset. This means that after the chairman of Xiangcai Co.,Ltd was appointed by the Zhejiang State-owned Assets Supervision and Administration Commission, the company successfully issued its first private placement bond. If we look at the entire year of 2024, brokerage firms' bond issuance costs have generally decreased compared to the previous year. The cost advantage of bond financing compared to other financing methods is more significant. Data shows that the average face value interest rate for securities company bond issuances in 2024 was 2.3%, lower than the 2.99% in the same period of 2023; the average face value interest rate for securities company subordinated debt issuances in 2024 was 2.59%, lower than the 3.6% in the same period of 2023; the average face value interest rate for securities company short-term financing bond issuances in 2024 wasThe coupon rate is 2.07%, lower than the 2.54% in the same period in 2023.Most securities firms concentrate their single bond issuance amounts between 10 billion and 30 billion yuan. Some large securities firms or firms with significant funding needs at specific times have higher single bond issuance amounts. For example, CMSC issued 50 billion yuan of corporate bonds (Series 1) to professional investors in 2024, and CITIC SEC issued 30 billion yuan of corporate bonds (Series 1) to professional institutional investors in the same year. Specifically, the interest rates of short-term corporate bonds are generally lower, with little fluctuation among different securities firms, mostly ranging from 1.8% to 2.3%. Compared to short-term bonds, long-term bonds generally have higher interest rates, with some differentiation in interest rates among different securities firms. For instance, CICC issued corporate bonds (Series 1) to professional institutional investors in 2024 with a coupon rate of 2.39%, while some smaller securities firms or junior bonds have relatively higher interest rates, such as Datong Securities issuing junior bonds (Series 1) to professional investors with a coupon rate as high as 5.6% in 2024. As for ordinary corporate bonds, CITIC SEC, as a leading securities firm, issued multi-tranche corporate bonds at relatively low interest rates. For example, the coupon rate of the corporate bonds (Series 1) issued to professional institutional investors in 2024 was 2.68%. In terms of perpetual junior bonds, due to their characteristics of combining debt and equity, their interest rates are usually the highest among all types of bonds. Cinda issued perpetual junior bonds (Series 1) publicly to professional investors in 2024 with a coupon rate of 2.39%, which is relatively high in this category. Compared to other financing methods, bond financing has the advantages of avoiding dilution of shareholder equity, flexibility in terms of financing period and scale, and a more convenient and efficient issuance process. However, it is important to note that in reality, securities firms have collectively withdrawn in both bond financing and equity financing since 2023. Regulatory authorities have repeatedly called for securities firms to focus on their core responsibilities and business, adhere to prudent operations, and embark on a new path of capital conservation and high-quality development. Overall, securities firms are more cautious and restrained in their approach to bond financing, actively responding to policy calls for capital conservation and high-quality development. This article is reproduced from "CaiLian News" and edited by GMTEight: Jiang Yuanhua.