Case Study On Perpetual Bonds Financing Of Evergrande Group

As typical capital-intensive industry,real estate enterprises has the characteristics of high capital investment,long recovery period and so on.Only firm's internal funds can't meet the capital needs.External financing is necessary for enterprises to obtain the funds required for the normal operation.Expanding the financing channels,realizing the diversified financing mode and solving the financing difficulties have become the essential issue of long-term healthy development of the real estate industry.However,the characteristics of low cost,decreasing asset-liability ratio and improved capital structure of perpetual bonds made itself attractive as soon as it appeared.This paper discusses researches about the motivation,distribution terms and risk of issue perpetual bonds from domestic and foreign academic circles.It can be seen that the academic research prefer theoretical,financial analysis that have instructive significance to the practice are very scarce.Perpetual debt is a bond that is nominally sustainable,with the characteristics of long maturity,low cost and no dilution of shareholders' equity.China's perpetual bonds market has been developing rapidly in recent years.As of December 31,2017,China has issued a total of 774 bonds,with a total issuance of 11,834.08 billion Yuan.Evergrande Group has a series of typical problems such as high asset-liability ratio,insufficient cash flow and limited financing channels.In order to broaden the financing channels,reduce financing costs and optimize capital structure,Evergrande Group has raised tens of billions of funds through perpetual bonds since 2013.Calendar year financial statement data,Based on Evergrande Group's annual financial statements,this article analyzes the financial effect and risk effect before and after the issue,comes to the conclusions that Evergrande group raised financing ability and debt paying ability by issuing perpetual bonds,as well as the issuance was too big that the use efficiency was not high.This paper is about the financial effect and risks of issue perpetual bonds based on the specific case analysi.It can evaluate the merits of the case company financing strategies,and has a certain reference significance to other enterprises which would like to financing through the perpetual.In view of the domestic research about perpetual bonds is less,and the selected data is more closer to the timing that before and after the issue of perpetual bonds,but not data over a long period of time,so it hascertain limitation.