The development and application of convertible Bonds -- A case study of Shanghai Pudong Development Bank's Convertible Bonds

Abstract

In recent years, with the continuous strengthening of refinancing demand, banks have more diversified ways of refinancing, such as perpetual bonds, secondary capital bonds, and convertible bonds. It is found that convertible bonds meet the capital replenishment needs of commercial banks, and the financing cost is compared with that of other financing instruments. The method adopted in this paper is the case analysis, and the "Pudong Development Convertible Bond" publicly issued by Shanghai Pudong Development Bank (SPDB) in 2019 is taken as the case study object. Based on the background that commercial banks are scrambling to issue related schemes of convertible bonds, this paper expounds on the financing effect and significance of the issuance of convertible bonds by SPDB based on the historical process and current situation of convertible bonds and the basic situation and financing process of SPDB. Comprehensive analysis shows that before the issuance of convertible bonds, the asset-liability ratio of SPD Bank is relatively high. After the issuance of convertible bonds, the asset-liability ratio and capital adequacy ratio of banks have been improved, but the return rate and net profit level have been negatively affected. The paper hopes to provide a reference value for issuers such as commercial banks and listed companies as well as regulators of convertible bonds on the improvement of the market system of convertible bonds.