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in recent years, due to the continuous occurrence of convertible bond delisting and default events, investors' willingness to participate in the repurchase when the redemption clause is triggered has increased, resulting in an increasing number of "mini bonds" in the market.

on september 20, with the end of the repurchase declaration period, kehua convertible bonds achieved a 20% daily limit, and the conversion premium rate rose to more than 330%. it is worth mentioning that as of now, the remaining scale of kehua convertible bonds is about 737 million yuan. some analysts pointed out that if the repurchase scale of kehua convertible bonds is large, the convertible bonds will become a "mini bond". "mini bonds" are generally favored by hot money, which increases the volatility of convertible bonds.

the number of convertible bond resale cases has increased

as the equity market continues to be sluggish and volatile, the prices of many convertible bonds have continued to remain low, resulting in a gradual increase in the number of convertible bonds triggering redemption clauses.

wind data shows that 70 convertible bonds have issued convertible bond repurchase announcements this year, a significant increase from the 51 in the whole of 2023. so far, the total repurchase amount of convertible bonds that have completed repurchase is close to 1 billion yuan, which is also a significant increase from 2023.

generally, convertible bonds will indicate the convertible bond resale terms when they are issued, which include conditional resale, additional conditional resale and other types. specifically, except for financial convertible bonds such as banks and securities companies, most convertible bonds have conditional resale terms some time before maturity. the typical conditional resale trigger conditions are "the last two interest-bearing years, 30, 70%", that is, "in the last two interest-bearing years of the convertible bonds issued this time, if the closing price of the company's stock is lower than 70% of the current conversion price for any thirty consecutive trading days", the convertible bond holder has the right to sell all or part of the convertible bonds held by it to the company; some convertible bonds have differentiated restrictions on the resale period, the calculation time for triggering the resale, the proportion of triggering the resale and other numbers.

additional put-back clauses usually mean that when there is a major change in the investment direction of the convertible bond funds, the convertible bond issuer needs to provide investors with a put-back opportunity.

in addition, in history, there are very few convertible bonds that have set up unconditional put clauses at specific nodes similar to credit bonds. convertible bond holders have the right to put back once, that is, they have the right to sell back all or part of the convertible bonds they hold to the company.

as of now, 60 convertible bonds including tianchuang convertible bond, mingli convertible bond, lingkang convertible bond, and kehua convertible bond have completed the sale back, and 10 convertible bonds including hongchuan convertible bond, huayang convertible bond, and mona convertible bond are in the sale back declaration period.

analysts pointed out that the convertible bond resale clause protects the interests of investors to a certain extent and is a way for investors to transfer risks to the issuing company. it gives investors a right and investors can choose whether to exercise this right according to market changes.

the rise of “mini bonds”

in recent years, the convertible bond market has undergone major changes, with a sharp increase in convertible bonds that have fallen below par value this year. when the put-back clause is triggered, investors tend to actively participate in the put-back. taking tianchuang convertible bonds as an example, since the company's stock price continued to be lower than the conversion price, the put-back clause was triggered, and a large number of investors chose to sell back, resulting in a put-back amount of about 534 million yuan for tianchuang convertible bonds. after the put-back was completed, the remaining size of tianchuang convertible bonds was only 67 million yuan, making it a "mini bond".

"mini bonds" usually refer to convertible bonds with smaller balances. these convertible bonds are often favored by hot money because of the small remaining size. on august 20, when there was no obvious fluctuation in the underlying stock, a large amount of funds violently pushed up tianchuang's convertible bonds, which achieved a 20% daily limit on the same day. in the following three trading days, tianchuang's convertible bonds all achieved a 20% daily limit, and the convertible bond price rose from around 100 yuan to more than 200 yuan, doubling in just a few days. as of now, the conversion premium rate of tianchuang's convertible bonds is close to 800%.

in recent years, due to the continued downturn in the a-share market, investors' enthusiasm for convertible bonds has declined, resulting in a reduction in the issuance and trading scale of some convertible bonds, and also leading to an increase in "mini bonds".

analysts point out that although "mini bonds" have disadvantages such as poor liquidity, their prices are highly volatile and may bring higher investment returns to investors. however, this requires investors to have a higher risk tolerance and market judgment ability.

how to participate in the sell-back?

generally, convertible bond prospectuses will include a put clause. the put clause will be triggered when the stock price of a listed company continues to be lower than a certain percentage of the convertible bond conversion price for a certain period of time or when the listed company changes the purpose of convertible bond proceeds.

when the convertible bond putback terms are triggered, listed companies should report to the exchange in a timely manner and issue a "convertible bond putback announcement" on the next trading day (t-day).

after a listed company releases a convertible bond resale announcement, investors shall submit convertible bond resale declarations within the prescribed time, and china securities depository and clearing corporation limited shall provide the listed company with resale declaration freezing data after market close every day. if the resale results in the convertible bond balance being less than rmb 30 million, the resale process will not be interrupted, and the convertible bond trading suspension procedure will be initiated after the resale procedure is completed.

after the resale declaration is completed, china securities depository and clearing corporation will provide the listed company with the final resale frozen amount, and the listed company will transfer the corresponding amount to the bank account of china securities depository and clearing corporation. after receiving the full amount of resale funds, china securities depository and clearing corporation will conduct clearing and delivery, and issue a confirmation certificate of the resale results to the listed company.

it should be noted that compared with the additional repurchase due to the reduction of registered capital, the conditional repurchase generally gives the issuer less time to prepare. this means that investors need to make repurchase declarations in a timely manner in the short term.

in addition, based on most previous cases, the time from when the company receives the repurchase data from china securities depository and clearing corporation to when it actually pays the repurchase funds generally does not exceed one week. if the repurchase amount is too large or there is a lag in fund raising, it may face technical friction risks.

citic securities research pointed out that in credit bonds, the ratio of cash on hand to the amount of bonds to be sold and matured is an important short-term debt repayment indicator. if some issuers do not use the funds raised from convertible bonds, but put them in cash or bank wealth management, and the cash/convertible bond ratio is above 1, it may be inclined to judge that the pressure of convertible bond sellback of the issuer is relatively controllable.

minsheng securities said that with the development of the convertible bond market, investors' participation in the bargaining over convertible bond terms has gradually deepened. in addition to the common downgrades and redemptions, putbacks are also terms that need to be paid attention to in convertible bond investments.