A commercial paper is defined as a debt financing tool that a non-financial corporation issues in the inter-bank bond market with the principle and interest repaid within one year. The bond has a term of 365 days, usually 3, 6, 9 or 12 months. It remains valid for two years and, once registered, can be issued on a rolling basis.
2. Qualifications for the issuer
An issuer must be a business entity incorporated according to Chinese law that:
·Has a stable source of funding for debt repayments and was profitable in the last fiscal year;
·Sustains good liquidity and strong debt-payment capabilities;
·Utilizes the funding from commercial paper for its own business needs;
·Has not violated any applicable laws in the past three years;
·Has not delayed principle and interest repayments on any long-term financing bonds issued over the past three years;
·Has a healthy internal management mechanism and a complete set of rules on using raised funds;
·and Other qualifications required by NAFMII.
3. Issue size
The balance of a commercial paper payable must not exceed 40 percent of the issuer’s net asset value. The issuer may determine the size of each issue within the limit.
The maximum term for a commercial paper is 365 days.
Cost advantages: better interest rate than bank loans;
High financing level: The balance of commercial paper payable can be up to 40 percent of the issuer's net asset value;
Flexible: The National Association of Financial Market Institutional Investors (NAFMII) requires registration and manages the balances of commercial paper. As these bonds can be issued in the inter-bank market on a rolling basis, issuers benefit from close integration with the market and are able to raise funds swiftly.
High level of information transparency: Continuous information disclosure and credit rating enables issuers to build a strong corporate image in the capital market, laying the foundation for sustainable financing.
6. Service description
As agreed with clients, CMB provides a series of value-added specialist services for the issuance of commercial paper. These comprise organization, coordination, and supervisory services that include client access, due diligence, issue planning, credit management, registration and issuance, and follow-up management.
Underpinned by its strong capital base and rich experience in the bond business, CMB is well-placed to offer high-quality and efficient end-to-end services as the lead underwriter of commercial paper.
7. CMB's advantages
Issuance planning: CMB relies on its team of high-caliber financing planners to optimally plan for the issuance of commercial paper geared to customers' cash flow changes, and eases their repayment burden by designing suitable installments and granting additional credit.
Issue pricing: As a lead bond underwriter, CMB enjoys the industry's strongest pricing power to issue commercial paper with a lower interest rate than comparable financing tools, helping customers minimize issue cost.
Underwriting channels: CMB has built a huge network of high-value customers, placing the bank at an advantage especially in an adverse bond issuance environment.
Service team: CMB was the first bank to set up an Investment Banking Department and implement a model of underwriting debt financing instruments involving HQ direct sales and close coordination between the head office and its branches. The bank boasts a strong team of experienced, high-caliber professionals. All members of the team have a master's degree or above and extensive experience in investment banking, with two-thirds having studied overseas. CMB's high-quality application materials help shorten approval time by NAFMII and facilitate bond registration and issuance.
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