Bank of China Interbank Dealers Association: Serve enterprise M&A restructuring, optimize M&A bill mechanism

On December 2nd, the Bank of China Market Traders Association formulated and issued a "Notice on Optimizing the Work Mechanism of M&A Bills". The same day, the Bank of China Market Traders Association announced that the optimized M&A bills are conducive to guiding funds to accurately support corporate mergers and acquisitions, improving the quality and efficiency of services in the interbank bond market to the real economy. It enhances the flexibility of fund usage and prioritizes support for mergers and acquisitions in key areas. It supports raising funds directly for the payment of M&A prices, repayment of M&A loans, and other purposes, and can replace the company's own funds spent on M&A activities in the past year, further expanding the scope of M&A support, and enhancing the flexibility and efficiency of fund utilization. At the same time, it clearly supports traditional industries to transform and upgrade, strategic emerging industries, and future industrial layouts in M&A activities. Original text: "Optimizing the Mechanics of M&A Bills to Serve Corporate Mergers and Acquisitions" In order to implement the spirit of the Fourth Plenary Session of the Twentieth Party Central Committee, implement the comprehensive policy requirements to rectify "involutionary" competition, serve the transformation and upgrading of the national economy, and promote high-quality development, the Trader Association, based on the practical experience of M&A bills and after fully researching market demand and soliciting opinions, on December 2, 2025, formulated and issued the "Notice on Optimizing the Work Mechanism Related to M&A Bills". The optimized M&A bills are conducive to guiding funds to accurately support corporate mergers and acquisitions, and enhance the quality and effectiveness of services in the interbank bond market to the real economy. Firstly, it enhances the flexibility of fund utilization and prioritizes support for mergers and acquisitions in key areas. It supports raising funds directly for payment of M&A prices, repayment of M&A loans, and other purposes, and can replace the company's own funds spent on M&A activities in the past year, further expanding the scope of M&A support, enhancing the flexibility and efficiency of fund utilization. At the same time, it clearly supports traditional industries to transform and upgrade, strategic emerging industries, and future industrial layouts in M&A activities. Secondly, optimize the information disclosure mechanism to adapt to the needs of M&A business. Fully consider the actual needs of M&A transactions, ongoing M&A projects can simplify or exempt the disclosure of sensitive information such as the name of the target during the issuance stage to meet commercial confidentiality requirements. For completed projects, disclose the impact of M&A, synergies, etc. Furthermore, enforcement of intermediary responsibilities, further strengthen the due diligence and ongoing management requirements of lead underwriters. Thirdly, strengthen the convenience of issuance and mechanism innovation, and improve service quality. M&A bills are individually named and identified, emphasizing the attributes of mergers and acquisitions. "Green channel" for the registration and issuance of M&A bills is opened, with instant evaluation, dedicated contact person, effectively improving the issuance efficiency. Support companies to flexibly set up hierarchical structures, convertible bonds, installment payment, and other personalized elements, encourage companies to enhance investor acceptance and product market vitality through protective clauses such as adding control change back clause, improving the risk-sharing mechanism. Next, the Trader Association will, under the guidance of the People's Bank of China, continue to explore the optimization of the mechanism related to M&A bills, expand the financing channels for corporate mergers and acquisitions, stimulate the enthusiasm of various entities to participate in the M&A market, help build a new development pattern, and promote high-quality economic development. Notice on Optimizing the Work Mechanism of M&A Bills China Trader Association No. 239 released in 2025 All market members: In order to accelerate the improvement of the market-based resource allocation system, increase support for economic structural adjustments and resource optimization, and meet the funding needs for corporate mergers and acquisitions, in accordance with the "Management Measures for Non-Financial Corporate Debt Financing Instruments in the Interbank Bond Market" (issued by the People's Bank of China Order No. 1, 2008), the Trader Association hereby notifies the relevant work mechanism on optimizing M&A bills as follows: 1. M&A bills are debt financing instruments issued by non-financial enterprises in the interbank market, raising funds for corporate M&A activities, with an agreement to repay principal and interest within a certain period. M&A activities refer to trading activities through methods such as transferring existing equity, subscribing for new equity, acquiring assets, or assuming debt, to achieve control, merger, or shareholding in the target enterprise or asset established and operated continuously. 2. Enterprises should operate legally and in compliance, with good credit standing, and both parties in the M&A should meet the relevant requirements of national macro-control and industrial policies, with priority support for traditional advantageous industries, strategic emerging industries, and future industries. 3. The funds raised can be directly used to pay M&A prices, repay bank M&A loans, return M&A-related trust products, or used to replace the company's own funds contributed to M&A activities in the past year. 4. The proportion of funds to be used for M&A transactions in the funds raised should not be less than 50% of the issuance amount, stored in a regulated account for fund management, not to be used for other purposes. The remaining part can be used for other business activities of the company but not for investing in listed company stocks in the secondary market. The proportion of funds raised for M&A transactions should not exceed 70% of the transaction price, with equity funds accounting for no less than 30% of the transaction price. For companies issuing M&A bills for joint ventures, the stakeholding in the target company after the M&A should not be less than 20%. For businesses issuing technology innovation bonds, the purposes and proportions of raised funds are specified accordingly. 5. In the registration stage, companies should disclose selection criteria for M&A targets, M&A decision-making processes, types of M&A projects, industries and sectors, and plans for the use of funds. 6. In the issuance stage, details of the M&A projects can simplify or exempt disclosing sensitive information such as counterparties in M&A transactions, specific names of the targets, stages of M&A, to meet project confidentiality requirements. For completed M&A transactions, disclosure should include the financial impact of the M&A transaction on the company, development prospects of the M&A target, synergy effects, integration arrangements, etc. If the M&A activities constitute a major asset restructuring of the company, disclosure requirements for major asset restructuring should also be met. 7. By April 30 and August 31 each year during the tenure of the M&A bills, companies should disclose the use of funds raised in the previous year and the current year's first half, as well as the progress of M&A projects and transactions. 8. Encourage companies to register and issue long-term M&A bills, matching the medium to long-term attributes of M&A businesses, reducing the risk of maturity mismatch, and enhancing the company's liquidity risk management level. 9. Companies should disclose contingency plans for M&A cancellations or major adjustments in the offering memorandum, including but not limited to early redemption mechanisms. After the issuance of M&A bills, in the event of M&A cancellations or significant adjustments, etc., the use of funds can be changed to regular fund purposes with the consent of the bondholders' meeting. 10. Support companies in designing hierarchical structures such as senior/subordinated levels, setting up convertible, rights-attached, floating interest rates, installment repayment of principal, etc., to meet the personalized financing needs of companies. 11. Encourage companies to enhance investor acceptance by adding restrictions on new debts, dividend compensation arrangements, control change return clauses, etc. Encourage market participants to enhance financing support through increased credit enhancement, pledging, setting up Credit Risk Mitigation Warrants (CRMW), etc., to increase risk-sharing arrangements. 12. Lead underwriters should provide a special due diligence report on the relationship between the M&A parties, the M&A process, the use of funds, and issue explanations in the due diligence report regarding any exemptions granted. Lawyers should provide professional opinions in the legal opinion on the use of funds raised by the M&A bills and the legality and compliance of the M&A transaction. 13. Each M&A bill should be separately identified, for example: Bond abbreviation: 25XX (Company) MTN00X (M&A), highlighting the attributes of M&A. If the registration quota for other debt financing instruments is not fully utilized, M&A bills can be issued through amendments to terms, or a new registration quota for M&A bills can be created. Before the issuance of M&A bills, if the M&A is canceled or significantly adjusted, the valid registration quota for M&A bills can be changed to other debt financing instruments. The registration and issuance evaluation process opens a "green channel", with dedicated personnel providing instant evaluations, to enhance registration and issuance efficiency. This notice shall be implemented from the date of issuance. After the publication of this notice, the "Announcement on Publishing the Form for Equity Investment-type Bond Disclosure" (Trader Association Announcement No. 37, 2020) will be simultaneously abolished. This notification is hereby issued. Bank of China Market Traders Association December 2, 2025 This article is compiled from the "Bank of China Market Traders Association Official Website", edited by Xu Wenqiang for GMTEight.