Case Study On Credit Default Of Local State-Owned Enterprise Yongcheng Coal Power Holding Group Co.,Ltd.

China’s bond market has developed from the 1980 s to present a large scale of bond funds and diversified bond types.As the size of the bond market expands,the number of bond defaults increases.Credit debt is one of the most typical and important bond varieties in China’s bond market.Local state-owned enterprises issue credit debt is one of the important ways to market financing.In the past,there were few credit defaults of highly rated state-owned enterprises.However,in 2020,a total of 8 state-owned enterprises defaulted and the amount of default reached 51.897 billion yuan,an increase of three times that of 2019 and a historical high.In this paper,Yongmei bond default event is the research object.On the basis of sorting out the relevant theories of credit debt default,this paper introduce the Yongmei bond default case,from the subjective reason and enforcement actions of bond defaults,then discuss and coal and other internal and external reasons of default,finally put forward the corresponding countermeasures and suggestions to the relevant parties of this default event.Yongcheng Coal power Holding Group Co.,Ltd.is a famous large-scale state-owned coal enterprise located in Henan province.On the evening of November10,2020,Yongcheng Coal and Power issued a notice saying that it was unable to pay the principal and interest payable on the bonds due at maturity under the agreed terms and constituted a material breach of contract.Yongcheng Coal power has the behavior of transferring core assets without compensation before default,and its book capital balance can fully repay principal and interest,so the default of Yongcheng coal bond is considered as a phenomenon of deserting debts.This paper considers that the default event of yongmei bond is the result of multiple internal and external factors.There are four external factors: the impact of COVID-19 on the economy,the restructuring of the coal industry,the failure of implicit government guarantee,and the dereliction of financial supervision and financial intermediaries.There are four main internal factors: weak business attributes of Yongmei Holdings,high leverage and high debt repayment pressure,serious money held by related parties and poor finances.Based on this,this paper suggests that issuers should use funds reasonably to avoid unreasonable debt structure and prevent financial risk transmission of parent-subsidiary companies.Regulators should strengthen supervision of high-risk local soes and improve the mechanism for investors’ compensation and protection.Financial intermediaries should change the charging mode of credit rating and perfect the joint credit granting mechanism to reduce information asymmetry.Finally,suggestions are given to investors from three aspects: breaking the belief of implicit guarantee of state-owned enterprises,paying special attention to the cash flow of state-owned enterprises,and rationally using the bond default representative system.