Case Analysis Of ZTE's Perpetual Bonds

Perpetual debt with no maturity period.Investors cannot ask the issuer to repay the principal,but they can get interest on a regular basis.It mainly has two characteristics:(1)there is no clear maturity date or the maturity time is very long;(2)before the bond is not redeemed,the issuer needs to pay interest on schedule.From these two characteristics,perpetual debt contains both the nature of claims and the nature of equity.When major companies are distressed by the difficulty of financing and expensive financing,the emergence of this new financing method,perpetual debt financing,has brought new opportunities for enterprises.It is the gospel of high asset-liability ratio companies and high credit.The well-being of rating companies.Perpetual bonds appeared earlier in foreign capital markets,have matured,and are widely used.However,China's perpetual bonds started late,and the first perpetual bonds only appeared in 2013.In recent years,some listed companies in Hong Kong have issued perpetual bonds.However,due to the low market demand for such bonds,the liquidity is far away.Not as good as ordinary bonds,so it is rarely issued.With the rapid development of China's bond market in recent years,perpetual bond financing can provide issuers with advanced foreign debt financing instruments,and provide investors with new investment products to meet their diverse investment needs,and launch sustainable development in a timely manner.Bond products are also very beneficial to enriching the product sequence of China's bond market.This article takes ZTE as the research object,starting from the motivation of perpetual debt financing,observing the entire process and management methods of ZTE's perpetual debt financing,and finally analyzing the effect of corporate perpetual debt financing based on this.This article first elaborates the research background and research significance,and reviews the literature on the nature of perpetual debt,financing motivation and financing effects,and then lists the research content and research methods of this paper,as well as its contributions and deficiencies.Secondly,the concept and characteristics of perpetual debt financing and the current situation of perpetual debt financing in China are introduced.At the same time,for the case analysis of the following paragraphs,the general process and evaluation methods of perpetual debt financing are introduced first in the theoretical section.Thirdly,highlight the entire process of ZTE's perpetual debt financing,first briefly explain the company's main situation,then introduce the company's perpetual debt financing plan design,then explain the three-phase financing process and how ZTE manages this batch of perpetual debt.Finally,according to the introduction in the previous chapter,the effects of ZTE's perpetual debt financing are analyzed from three aspects: financing motivation,comparison with other financing methods,and management performance evaluation.Through case analysis,this paper finds that perpetual debt financing can optimize the debt structure and protect the company's capital needs.In order to avoid triggering the interest rate jump mechanism,ZTE also chose to redeem perpetual bonds on the first maturity date.From the perspective of cost management,ZTE's approach is worth learning from.However,the new regulations issued by the Ministry of Finance in 2019 have also had some impact on the disclosure of future perpetual debt financing.At the end of the article,the author combined with the practices of case companies to give some references to issued and unissued perpetual bonds.The enlightenment promoted the smooth development of perpetual debt financing.