Listed companies lining up for private refinancing

China's listed companies are queuing up for refinancing opportunities, with nine listed firms raising 19.8 billion yuan (2.47 billion U.S. dollars) of private funding since the stock market ended a year-long ban on the practice in May.

Listed companies have a choice of public refinancing, by which they issue stocks on the markets, or private refinancing, by which they issue additional stocks to designated institutional or individual investors.

The China Securities Regulatory Commission (CSRC), the country's securities market watchdog, has simplified approval procedures for private refinancing, while its regulations on public methods are both strict and complicated.

Most listed companies choose the private method so as to raise funds quickly and lower the refinancing cost, the Xinhua-run Shanghai Securities News reported on Wednesday.

The CSRC had become very cautious about approving public refinancing proposals, setting strict standards for public offerings and complicating the approval procedure.

The nine listed companies that refinanced through issuing stocks to designated investors accounted for over 80 percent of the total refinancing volume since May, making private refinancing the preferred choice for listed companies.

A further 89 A-share companies had announced plans to refinance by issuing stocks to designated investors by July 18, the newspaper reported.

They planned to raise more than 80 billion yuan, exceeding the total refinancing volume in 2003 (34.9 billion yuan) and 2004 (42.8 billion yuan).

The machine manufacturing, non-ferrous metals, steel and real estate sectors were most eager for immediate refinancing. The listed firms with the highest refinancing demands were in the banking, steel and iron sectors.

China Minsheng Bank, listed on the Shanghai Stock Market (SHA 600016), would raise another 13 billion yuan (1.62 billion U.S. dollars) by issuing up to 3.5 billion shares to designated institutional investors.

Under China's regulations on securities issuance, no more than 10 institutional investors can purchase the stocks and they are barred from selling within a year in order to avoid destabilizing the market.

The CSRC suspended refinancing of listed companies throughout 2005 in order to revive the bearish market. Frequent refinancing and initial public offerings had been blamed for contributing to the slump.

Source: Xinhua