Research On The Motivation And Performance Of China Dynamics' Directional Convertible Bond Restructurin

With the continuous development of China’s capital market,restructuring promotes the integration of corporate resources,enhances the profitability of the company,realizes industrial upgrading and technological innovation,and thus enhances the core competitiveness of the enterprise,which is the leapfrog development of the enterprise becomes the necessary way for today’s enterprises to become bigger and stronger.However,in recent years,with the restrictions of national regulatory policies and the macroeconomic downturn,the number of asset restructuring of listed companies in China has gradually decreased,in order to accelerate the rebound of the restructuring market,in recent years,the Securities Regulatory Commission has issued successive documents to encourage listed companies to restructure,in November 2018,the China Securities Regulatory Commission issued an announcement that it will implement the pilot work of the directional convertible bond M&A payment instrument,the directional convertible bond payment method has emerged to enrich corporate financing channels,promote the occurrence of corporate M&A acts in the M&A market and enliven the sluggish status quo of China’s M&A market since 2018.Since the introduction of the pilot policy on directional convertible bonds in 2018,although the emergence of the new payment instrument has obviously aroused strong interest in the capital market,most enterprises are still in the wait-and-see stage due to the relatively short time of application of directional convertible bonds in China’s M&A market and the small number of successfully landed cases,and the corresponding research literature on directional convertible bonds is scarce,while there are few studies combining directional convertible bonds with actual cases There is a paucity of literature on targeted convertible bonds and few studies combining targeted convertible bonds with actual cases.Therefore,it is important to study the motivation and performance of companies using targeted convertible bonds for restructuring.In this paper,China Power is selected as a case study.China Power released a major asset restructuring proposal at the end of 2018.It has become the first A-share company to use targeted convertible bonds as a restructuring payment method and financing tool at the same time,while injecting a number of assets and reducing leverage to address the capital constraints faced by "military to civilian".This paper summaries the existing domestic and international views and hypotheses through literature research,and uses case studies to explore the case of China Power’s restructuring by issuing directional convertible bonds,and to explore the motivation for its restructuring by issuing directional convertible bonds based on financing and governance dimensions.The case study then uses the evaluation of China Power’s performance before and after the issuance of the targeted convertible bonds and analyses whether the company achieved its objectives by using convertible bonds as a payment method.Finally,the findings of the case study are summarized,and based on the previous paper,insights are drawn and recommendations are made for other companies to follow.By analyzing the motivation of China Power’s restructuring through the issuance of targeted convertible bonds,the study found that China Power was mainly influenced by a combination of financing and governance motivations in the choice of China Power’s restructuring payment method.A study of the performance of China Power’s restructuring by issuing targeted convertible bonds found that China Power’s restructuring by issuing targeted convertible bonds had a positive capital market effect,driving up the company’s share price and significantly improving the company’s operating capacity,debt servicing capacity,financing capacity and innovation capacity compared to the pre-reorganisation period,thus contributing to a further increase in the company’s market share.The main reason is that convertible bonds have debt and equity characteristics that can affect the financing and governance functions of a company,which in turn can affect the restructuring performance of a company,so convertible bond restructuring can directly affect the restructuring performance of a company for financing and governance motives.The analysis of the restructuring behaviour of China Dynamics’ issuance of targeted convertible bonds is expected to provide implications for the selection of targeted convertible bonds by subsequent companies.