The National Interbank Funding Center ("NIFC") has recently issued the Implementing Rules for Disposition of Defaulting on Repurchases (for Trial Implementation) (the "Rules"), immediately effective from the date of issuance.
The Rules provide that to entrust the trading center to deal with a default in bond repurchase, an observant party shall submit four documents, including the NIFC Application Form for Disposition of Defaulting on Repurchases, adding that an observant party must warrant that the underlying rights, such as the creditor's rights and the rights over collateral, involved in its application filed for disposition of defaulting on bond repurchase are free of defects, the bonds that should have been bought back are neither in dispute over their ownership nor involve any right-related defects, and it will bear corresponding legal liability. Meanwhile, the Rules expressly state that the trading center will make an announcement in the market about the anonymous auction sale of the bonds at issue, on the date when an application for disposition of defaulting on repurchases is accepted, adding that such announcement should clarify the dates when applications for participating in the anonymous auction sale will be accepted, the auction date, valid time periods in different phases of an auction sale, among other relevant information. The trading center will, on the auction date, announce to the market the lowest deal price for the bonds to be sold by auction, and such lowest deal price should be determined at 80 percent of the average deal price of 30 trading days prior to the auction sale of such bonds in the interbank bond market, or if not applicable, set in an alternative way.