Shang Hai Zheng Quan Bao·2025-11-01 06:16Core Viewpoint - The China Securities Regulatory Commission (CSRC) has initiated an investigation into First Capital's investment banking subsidiary for failing to diligently oversee the convertible bond project of Hongda Xingye Co., Ltd. in 2019, highlighting the ongoing responsibility of underwriters throughout the bond's lifecycle [1][11]. Group 1: Company Actions and Responsibilities - First Capital's investment banking arm will actively cooperate with the CSRC and adhere to regulatory disclosure obligations, stating that its current operations remain normal [2]. - The investment bank had previously issued a warning regarding the risk of default on the convertible bonds issued by Hongda Xingye, indicating significant uncertainty about the company's ongoing viability [2][11]. Group 2: Financial Details of Hongda Xingye - In December 2019, Hongda Xingye issued 24.27 billion yuan worth of convertible bonds, with a maturity of six years, and as of March 18, 2024, 337 million yuan of these bonds remained outstanding [3]. - The company’s stock was delisted on March 18, 2024, after its share price fell below 70% of the conversion price for 23 consecutive trading days, leading to concerns about its ability to meet bond redemption obligations [4][11]. - As of the bankruptcy ruling, Hongda Xingye had total assets of 9.964 billion yuan and total liabilities of 33.845 billion yuan, resulting in a net asset deficit of 23.881 billion yuan [9]. Group 3: Regulatory and Market Implications - The case underscores the regulatory trend of holding underwriting institutions accountable for their ongoing supervisory responsibilities, warning other firms to enhance their diligence in continuous oversight [1][11]. - The market has begun to reflect on the responsibilities of intermediary institutions amid Hongda Xingye's financial collapse, emphasizing the need for investment banks to maintain a high level of diligence in their supervisory roles [11].