Research On Perpetual Bond Of XZT Company

Perpetual bonds refer to the securities whose maturity date is uncertain.When the debtor decides to repay the principal,the creditor cannot redeem the principal according to their wishes and they can only obtain interest on a certain period of time.Perpetual bonds,as a financial instrument with dual attributes of "shares" and "debt," may be recognized as equity capital or may be recognized as debt capital,it’s depending on whether "deferred interest payment" and "Maturity redemption" and other terms is setted in the issuance clause.Perpetual bonds may be unfamiliar to most domestic issuers,but they have been developed internationally and been widely used.From the perspective of the external financing environment of the enterprise,the changes in the macroeconomic environment,the regulation of government policies,and the controling and management of the credit scale of financial institutions have caused more and more companies to fall into financing difficulties and hinder the healthy development of enterprises;from the internal financing structure of enterprises,traditional financing methods may lead to a higher financial leverage,causing companies to use excessive financial leverage,increase the financial risk of corporate,and reduce their refinancing capacity,or dilute shareholders’ equity,bringing some negative influence.Therefore,how to broaden financing ways,increase corporate cash flow,stabilize asset-liability ratio,and optimize corporate capital structure had became major issues that companies need to face.As a new type of hybrid financing tool with both “equity” and “debt”,perpetual bonds came into being.Perpetual bonds started late in our country and are extended in an untroditional development path.Under the background that related policies and systems are still not perfect,although companies issuing perpetual bonds can solve part of the financing demands,there are also some hidden problems and risks.So,this article chooses the case of XZT’s issuing perpetual bond financing in 2015 as a study object,hopes to provide some references for enterprises which issue perpetual bonds during the period of rapid development of perpetual bonds.First of all,this article starts from the research background and significance,based on reading and summarizing the research results of other scholars,elaborates the definition and characteristics of the perpetual bonds,the development status in our country and other related concepts as well as the theoretical basis for the writing of this article.Then,analyzed the XZT company profile and its perpetual bond issuance situation on the basis of analysis of the XZT company’s motivation to issue perpetual bonds.Last,analyze the distribution effect of XZT’s issuance of perpetual bonds.The research in this part mainly starts from the three dimensions of comparison with different financing methods,short-term market reaction and influence on finance.By studying the case of XZT’s issuance of perpetual bonds,this paper concludes that although the issuance of perpetual bonds could obtain funds on the premise of protecting part of the shareholders’ equity,optimizing the capital structure of the company,and enhancing the refinancing ability of the company,it does not optimize the average capital cost of the company because of its high initial interest rate and the impact of the interest rate jump mechanism.It can only ease the capital demand of the company in the short term,and the stock market is affected.Finally,based on the above findings,this paper summarizes the implications of this case for issuing companies and regulatory authorities which issuing perpetual bonds.