A Study Of Financing Strategies For The Developing Chutian Expressway

Over the past two decades, the development of our national highway has maderemarkable achievements, the mileage of highway become to the longest of the world.Highway should be a public product which has been constructed and maintained bygovernment. However, only by the government as an investor is far from being quick topromote their development, so our country launched a series of supporting policies. The mostprominent of them is "loaning for expressway and charging repay a loan". At present,60%ofcorporate funding comes from banks. In2013, lending environment of bank went down, butas long as our country remains the implementation of loaning for expressway and chargingrepay a loan, banks are still willing to provide funds for the companies. But this situationwill further worsen the capital chain and increases the debt risks of companies. How tointegrate the funds to invest and maintain the sustainable development of the finance becomethe primary focus of the highway business. The modes of the financing of the bank loan mustbe changed, and carry out diversified financing modes to keep the target capital structure andreduce the risk of the debt.During the practical operation of the financing, mostly enterprises’ ultimate goal isintegrating the capital, so often focus on funding gap and overlook the debt risk andundervalued enterprise market value of long-term unreasonable financing structure. In thispaper, Hubei Chu Tian Expressway Co., Ltd. as the main object of study, by analysis itsfinancing and financial situation to find the existing problems, and analysis its requirementand environment of financing. Learning from the experience of foreign countries anddomestic highway companies, propose the financing strategy in the end of the paper. Thispaper’s main conclusions are as follows:(1) The company is in the expansion phase, the amount of investment has expandedeach year, but the company’s capital operations is weak, mainly rely on bank loans,accounting for51%of total assets in2013, resulting in the company’s asset-liability ratio ismuch higher than other companies. The company’s ownership structure is single, the debtservice is weak, financial expense is large and result to the operating is not ideal.(2) In the future, the amount of the company’s investment is large, the debt repayment isstressed and credit policy is tightening, changing financing strategy is imminent.(3) The rapid development of the highway must take diversified financing channels tointroduce private funds. It needs to be guided by government to set up financing platform,improve laws and regulations, and create a good financing environment. (4) In the future, the company’s debt-to-assets ratio should not be rise, the companyshould increase direct financing to reduce the cost of capital. Developingdiversified financing modes, coordinate the relationship of short and long-term financingstrategy to reduce financing risk. The financing strategy can be made as follows: acceleratingthe implementation of diversification to increase the endogenous financing; Maintaining goodcooperation with banks; taking advantage of corporate bonds; Implement private placement ofproject financing; Exploring asset securitization and curve equity financing, etc.