Research On The Causes And Effects Of Default Of Private Equity Exchangeable Bonds

Since 2018,under the background of the policy of " Three Reductions,One Lowering and One Compensation ",the "Financial Deleveraging" has been further intensified,and the financing difficulty of domestic enterprises has increased accordingly,and the capital liquidity problem of more and more enterprises has become prominent.The domestic economy is still in a downward cycle,the sudden epidemic situation has also increased the systemic credit risk,and the possibility of the outbreak of credit debt defaults has increased.In this context,select the domestic private exchangeable bond defaults for the first time Feima Investment "16 Feitou" series of private exchangeable bonds as the research object,analyzes its causes and influence of bond defaults,in order to find private exchangeable bonds default characteristics,with a view to make targeted recommendations for preventing bond defaults.First of all,through the literature research method to comb the domestic and foreign research on bond defaults and exchangeable bonds research status quo,clearly this paper focuses on the analysis of the causes and effects of the default of private placement exchangeable bonds.Secondly,by using the case study method to study the motivation and process of Feima Investment in issuing private equity exchangeable bonds,based on the characteristics of private equity exchangeable bonds,analysis of the causes of its bond defaults from direct and indirect angles found that: Feima Investment 's poor capital market financing environment,deteriorating financial conditions,inappropriate timing of bond issuance,high equity pledge ratio leading to lack of financing methods and the improper selection of underlying stock are the direct causes of the default of Feima investment privately exchangeable bonds;the indirect cause of the default of the bonds is that the operating condition of the target stock company is getting worse,the stock price is not stable during the stock exchange period,the creditor's confidence in the stock exchange is not enhanced,and the bond trustee's management is not compliant.Then,from the direct and indirect perspectives,this paper analyzes the adverse effects of Feima Investment private placement exchangeable bond default found that: due to private equity exchangeable bond default and its negative effects,directly caused Feima Investment liquidity difficulties,financing difficulties further increased,profitability decline disengaged,while falling into litigation crisis,constantly passively reduce the underlying stock;and also indirectly led to a declining credit rating of Feima International,a standard-label stock company,and the marked decline in its ability to raise capital,as well as losses to bond creditors and small and medium-sized investors,which also suffered losses from bond default funds and negatively affected the reputation of bond management intermediaries.Finally,based on the analysis results,suggestions are put forward: the issuer of private placement exchangeable bonds should evaluate the financing structure,issue bonds in a timely and reasonable manner,enhance the liquidity of the bond survival company,rationally select the underlying stock,ensure the stability of the bond exchange price;the bond management agencies should avoid "multi role" and reduce the risk of non-compliance;the regulatory authorities should strengthen the examination of the motivation of issuers of private exchangeable bonds,standardize the information disclosure of the whole process of private exchangeable bond issuance,improve the supervision of the whole process of bonds,accelerate the construction of bond default market mechanism,and reduce the adverse effect of private placement exchangeable bond default on bond market.The main contribution of this paper is to analyze the causes and effects of the first case of default of private placement exchangeable bonds in China to find that: compared with ordinary bonds,the main causes of private equity exchange bond defaults are not only closely related to the macroeconomic background and bond issuer's operating conditions,but also related to the appropriateness of the underlying stock selected by the issuer.At the same time,the operating conditions of the underlying stock company and the bond management compliance of the bond manager will also indirectly affect whether the privately exchangeable bonds default.Private equity exchangeable bond defaults will not only have a negative impact on the bond issuer's continued operation,but also increase the risk of the issuer's passive reduction of the underlying shares,which will adversely affect the underlying stock market,at the same time,it has a negative impact on the reputation of the intermediary agencies related to the credit rating and bond management of the target stock companies.