Exchangeable bonds appear to be an ideal instrument for China's state-owned companies, but the market faces two significant challenges. Bankers said firms interested in such bonds are reluctant to have their books scrutinised to the extent that a public bond requires. "We have tried to pitch [exchangeable bonds], but no one is interested," said one banker. "These companies prefer selling the shares directly to the market ... and the last thing they want is to open themselves to the public." Also, issuers are required to exchange the bonds at a significant discount.
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