Case Study On Bond Default Of Yongmei Group

After decades of development,China’s bond market has grown in scale and become the core of the financial market,playing an important financing function.The rapid development of the bond market is accompanied by the continuous accumulation of risks.In 2014,"Chao Ri bonds" substantially defaulted,and the era of rigid payment in China became history.Since then,bond defaults have become frequent and the scale of default has been rising year by year.Private enterprises and low-rated enterprises have always been the main force of bond defaults.In 2020,the scale of bond defaults of state-owned enterprises reached 79.7 billion yuan,surpassing private enterprises for the first time,among which there are some highly rated bond issuers.Frequent thundering of large-scale high-rated state-owned enterprise bonds not only breaks the market’s expectation of implicit government guarantee and damages investors’ interests,but also causes the entire bond market and stock market turmoil due to the existence of contagion effect.Therefore,it is of great practical significance to effectively prevent the risk of bond default and reduce the occurrence of default events by studying the deep-rooted causes of bond default of state-owned enterprises.Yongmei,an AAA rated local state-owned enterprise,defaulted on its bonds for the first time in November 2020.Based on this,this paper uses case analysis method to study the three bonds "20 Yongmei SCP003","20 Yongmei SCP004" and "20 Yongmei SCP007" that have defaulted continuously,as well as many bonds that implement the extension plan before maturity,analyzes the root cause of their bond default,and then puts forward the enlightenment of preventing bond default risk.First of all,this paper reviews the domestic and foreign literature on the influencing factors,consequences and management of bond default,and analyzes information asymmetry theory,incomplete contract theory and sequencing financing theory.Secondly,it introduces the development history and main business of Yongmei Group,combs the whole process of the bond default,and analyzes the negative impact of the bond default.Thirdly,from the internal and external aspects of the company to explore the root causes of bond default,the study found that the internal factors of default mainly include major shareholders through capital collection,related parties through transactions and guarantees to occupy the capital,the company’s profitability and debt paying ability is insufficient and the company’s business strategy is unreasonable.The external factors mainly include the imperfect information disclosure mechanism,the failure of relevant intermediary agencies,the inherent contradictions in the coal industry and the financing difficulties after the tightening of macro policies.Finally,on the basis of the reasons for default mentioned above,it is concluded that the subjects of bond issuance should adjust their business strategy reasonably,explore various financing channels,allocate debt maturity interval,the supervision subjects should improve the information disclosure mechanism and credit rating mechanism,and the investors should improve the awareness of risk prevention.It is hoped that the case study of Yongmei Group can provide some reference for similar enterprises with bond default risk and promote the healthy development of bond market.