Research On The Financial Effect Of Convertible Bonds Issued Hengfeng

As time moves on,the Chinese capital market structure has been more completed nowadays.Although there still are many differences between Chinese and Western capital market,however the “Wall-street” Securities tools from the Western market have been more widely used in the local market.The history of emergence of convertible bond in China has a long period of time.Convertible securities are widely recognized by the company and investors,offering an alternating method for them invest in the capital market.In the institution point of view,convertible bonds have the unique characters such as low financial costs,decreasing the rate of equity dilution and optimizing the capital structure of the company.From the investors aspect,convertible bonds provides fixed-rate of income,which can avoid part of the securities market risk.In the following contents in this article,I have selected a few companies which are operating successfully in the paper industry to carry out my analysis.In China the paper industry had occurred long time ago,the industry business cycle is currently in a stage of sharp contradiction between supply and demand.Hengfeng Paper is a company which main producing cigarette paper,and focusing on their product research,market development,production upgrading and sales for more than 50 years.However,the company doesn't have a mature operating strategies so that their product can only target to a single market,which means they don't use their brand name and experiences properly to diversify their market to increase revenue.During 2012 Hengfeng Paper decided to issued convertible bonds,according to this,this article is focusing on this key financial event.Hengfeng Paper issued convertible bonds before and after years of changes in financial effects,the analysis I conduct is using the Harvard analysis,include the analysis structure for the company's strategic,accounting,financial,prospects analysis and Hengfeng Paper EVA.EVA calculation can be calculated by the cost of capital in the company's financial performance.This paper also analyzes the market reaction and the conversion of Hengfeng Paper on the bond issue announcement date.Through these analysis,we can have a proper review of Hengfeng Paper in issued convertible bonds event,especially on the impact of their financial effects,which we can have a deeper understanding in this area.Through the analysis of Hengfeng Paper,there are problems can be found in Hengfeng Paper's issuing convertible bonds event.We can extend these issues into the whole industry from a single large company.Hengfeng Paper issued convertible bonds to effectively curb the rising debt levels,but does not give a positive effect to Hengfeng Paper's profitability.For Hengfeng Paper and the entire Chinese paper industry companies,the problem of a clear financing status assess the benefits of financing is necessary to solve.The paper industry is already overcapacity,the problem of how to make good use of funds is more important than how to raise funds.Hengfeng Paper invested in a new project to be terminated in 2015,which gave a warning to the paper industry companies to grasp the market trends and expand the scale of operation.It's more important for the company to expand carefully instead of blind expansion.