Design Of Convertible Bond Terms

Convertible bond is a financial derivative instrument with equity,claims and options.Investors who invest convertible bond can flexibly choose whether convert it into common stock or not.Convertible bond was born in the United States in 1843.Our country issued the first convertible bond in 1992.Nearly 30 years later,the development of convertible bond entered the prosperity period.Current research on convertible bond focuses on pricing,financial efficiency,investment risk and the design of terms.There are some problems in designing terms,such as different convertible terms cannot reflect the characteristics of funding demand,the protection of shareholders is insufficient,and the redemption terms are invalid.This paper will put forward some suggestions to improve the terms of Gree Debt Conversion and solve them,then providing some reference for the design of convertible bond terms in the future.This paper chooses Gree Convertible Debt as a case whose issuance time is the furthest from now over the trading convertible bonds,then analyzing several terms of the convertible debt and finding out the terms design problems in this case.The first chapter we will introduce relevant theories,the definition and characteristics of convertible bond,then we will define three participants who take part in the issuance and transaction of convertible bonds,at last in this chapter we will point out some common problems existing in the design of convertible bond terms in our country now.The second chapter of this paper,firstly,we will introduce the basic situation messages of Gree Convertible Bond and Gree Coast.Then we will list the terms of Gree Convertible Bond.Finally,we will analysis the Gree Convertible Bond’s three selling methods and its interest rate term,conversion term,redemption term,repurchase term and downward revision term,then we will point out the problems in these terms.In the third chapter,in order to give consideration to the rights of issuers,investors and minority shareholders and solve the problem that charicteristics of funding demand cannot be reflected in terms,we design partial debt convertible bond to solve the problem of low enthusiasm.In order to solve the redemption terms’ invalid problem and protect the right of minority shareholders and investors,we will design partial debt convertible bonds and strengthen the linkage between the repossession term and the downward revision term.After analysis,this paper draws the following conclusions:firstly,we need to understand the characteristics of issuers,large enterprises with sufficient economic strength and financing capacity can priority issue convertible bonds with partial debt.Secondly,if convertible bonds want to show partial debt demand on capital preference,it can be reflected from the terms design.It is both convenient for investors to identify the risk level of the convertible bonds and for issuers to select more suitable investors,so as to facilitate the smooth issuance.