MTNs refer to the bond financing instruments issued by non-financial enterprises with legal person qualification in the inter-bank bond market by planned installments who promise to repay the principal and pay the interest within a certain designated time period. MTNs provide enterprises with a type of medium-term (generally, more than 1 year) direct financing instrument, and help enterprises to flexibly distribute their finance costs, optimize their financial structure and constructively reduce financing costs. The fund raised through issuance of MTNs may be used to improve the fund source structure of enterprises and adjust liability structure, etc.
MTNs issuance is characterized as a flexible offering mechanism. After completion of the registration, the enterprises may issue MTNs in small amounts, consecutive or cyclical mode and have great flexibilities in the selection of offering amount, maturity and issuance time. Enterprises may even capitalize on the fluctuation of market interest rates and select to launch the MTNs issuance during the most advantageous time. MTNs may be issued with a floating rate or a fixed rate of interest.
Different from the mechanism of enterprise bonds that are issued by agencies of the central governmental departments, solely state-owned enterprises or state-controlled enterprises and corporate bonds are issued on a pilot basis by listed companies. The issuer of MTNs cover a larger scope of enterprises, and all of the non-financial enterprises with legal person qualifications can issue MTNs. At present, the enterprises with generally a total asset of more than RMB10 billion can issue MTNs.
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