CITIC Securities Co is planning to issue up to 2 billion yuan (US$241.5 million) of 5-year corporate bonds, the company announced yesterday.

On Monday, the company's board of directors approved the bond issue, which is denominated in renminbi and is expected to carry an interest rate capped at 3.9 per cent.

"The proposal is still to be discussed and approved by the shareholders' meeting on October 16. If approved, we will try to submit relative applications to the securities authorities as soon as possible," said Zheng Jing, securities affairs representative of CITIC Securities' board of directors.

She told China Daily yesterday that the issue would be targeted at a limited group of institutional investors for private subscription.

The issue will give CITIC Securities, one of the two securities companies listed in China, even wider financial resources and help it further improve liquidity and capital adequacy.

The company reported net assets of 5.2 billion yuan (US$628 million) last year 2002 and net profits of 110 million yuan (US$13.3 million).

According to a regulation released two weeks ago by the China Securities Regulatory Commission (CSRC), the securities watchdog, securities companies that want to issue corporate bonds need to have a minimum net assets of 1 billion yuan (US$121 million) and a record of profits in the previous year; and the volume cannot exceed 40 per cent of the company's net assets.

CSRC will start to receive applications from securities firms on October 8.

Before the regulation on bond issues, securities companies were complaining of narrow financing channels for their business, which has been hit by shrinking brokerage and investment-banking income in the bearish stock market.

Besides CITIC, other securities companies have also shown interest in issuing bonds, including Beijing-based China Galaxy Securities and GF Securities of Guangzhou.

Galaxy is reported to be planning a 3-billion-yuan (US$362.3 million) issue; while GF Securities also said it was keen and would act when the new regulation took effect.

According to the entry thresholds set by CSRC, such as asset scale and profit record, only a few large outfits from China's more than 100 securities firms would be eligible to issue bonds.

Also, a series of standards have been designed to ensure the payment ability of the issuers, who also have to disclose information timely on the usage of the funds raised, which cannot be altered or used for any illegal purpose.

In addition, issuers should not have been involved in any major irregularities over the previous two years and be equipped with sound internal controls, according to the regulation.

Despite the strict standards, issuing bonds involves much lower costs and perhaps higher fund-raising efficiency than stock listing, especially when the bond market has outperformed the stock market, analysts said.

China's securities regulators are also working with other departments to widen financial access for the securities business, brewing more lenient policies on borrowings that use stocks as collateral as well as interbank loans.

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