(Yicai) Oct. 21 -- Six Chinese commercial banks have extended special credit of more than CNY11 billion (USD1.5 billion) to 23 listed companies for the purpose of repurchasing company shares as part of a new initiative that was included in a hefty economic stimulus package rolled out by the government less than a month ago.

The company or the controlling shareholder has obtained a loan commitment letter from or reached a co-operation intention with a commercial bank, the 23 firms announced respectively yesterday. Four major state-owned banks, namely Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank, as well as two large joint-stock banks, China Merchants Bank and China CITIC Bank, will issue the first batch of loans.

Prive owner controlled pig breeder Muyuan Foods bagged the highest amount of credit at CNY2.4 billion (USD337.6 million), followed by state-owned petrochemical giant China Petroleum & Chemical Corp. with CNY1.6 billion, state-owned energy transportation giant COSCO Shipping Energy Transportation at CNY1.3 billion, and another hog breeder Wens Foodstuff Group at CNY1 billion.

This first batch of companies was made up of relatively high-quality listed entities that easily met regulatory requirements so the approval process was quite fast, a source at the credit center of a large joint-stock bank told Yicai.

"Banks give priority to listed companies with stable market value, active stock market transactions and good liquidity, especially those that are included in the CSI 300, CSI 500, CSI 1000 and other indexes," a person working at a joint-stock bank in East China told Yicai.

In other words, those companies with a healthy main business, stable operating conditions, a good credit record, strong repayment ability, competitive advantages and robust growth potential, he added.

Of the 23 firms, 15 are listed on the Shanghai or Shenzhen main boards, two have gone public on Shanghai’s Nasdaq-style Star Market and six have floated on the Shenzhen Growth Enterprise Market. In the first half, 22 out of the 23 turned a profit and more than 60 percent logged a jump in net profit from the year before.

A second batch of companies is expected to be announced soon as many banks are currently in talks with more firms about the issuance of special stock repurchase loans, Yicai learned from insiders.

Last month, the People’s Bank of China rolled out a hefty economic stimulus package which included the creation of a special re-loan for stock repurchases. Banks should provide loans to listed companies and major shareholders to support them to buy back stocks or increase their holdings in their own company, Governor Pan Gongseng said on Sept. 24.

Twenty-one financial institutions were selected to issue special loans to eligible listed companies and their major shareholders for the purpose of share repurposes at an interest of not more than 2.25 percent, the central banks and two other Chinese financial regulatory bodies said on Oct. 18.

The central bank will then provide re-loans to these financial institutions in the first month of the following quarter amounting to 100 percent of the loan principal, they said. The first batch of re-loans is CNY300 billion (USD42.1 billion), with an annual interest rate of 1.75 percent and a term of one year. The term can be extended depending on the situation.

Editors: Tang Shihua, Kim Taylor