The Shanghai Stock Exchange ("SSE") has recently issued the Circular on Matters concerning the Pilot Program on Public Issuance of Short-term Corporate Bonds (the "Circular") and the Shenzhen Stock Exchange ("SZSE") has also released its counterpart document. Both shall enter into force immediately from the date of issuance.
The Circular states that an issuer that intends to apply for public issuance of short-term corporate bonds and having them listed on the SSE, shall have good capacity for debt repayment in a short term. During the pilot period, the short-term corporate bonds will be publicly offered only to professional investors, and companies covered by the pilot program shall meet one of three conditions, such as "being governed by the SSE's optimized regulatory arrangement for corporate bond financing, and the issuer's average net cash flow for business activities in the most recent three years being positive or its quick ratio at the end of the most recent year being higher than one". The term to maturity for short-term corporate bonds that are issued publicly should be no longer than one year, and the specific term will be determined by the issuer in light of its capital needs for production and operations and the market situation. The Circular further clarifies that application documents for public issuance of short-term corporate bonds are same as those required under the existing provisions in respect of public issuance of corporate bonds, and an issuer shall undergo a credit rating on itself and may decide at its own discretion whether to undergo a credit rating on the bond.