The Case Analysis Of Zhonghong Company Limitied's Bonds Default

In recent years,the bond market has entered a stage of rapid development,the issuance scale is increasing year by year and the new types of bonds emerge constantly,therefore bond repayment crises frequently and Substantial events of default have reached new heights.Increasing default events not only bring huge losses to investors,but also affect the stability of financial markets by spreading credit risk from default to the whole market.Zhonghong holding company is mainly engaged in the development and operation of real estate,which was listed on the backdoor A share market in 2010.The real estate business has been one of the main profit sources of the company for many years.In recent years,due to the downturn of macroeconomic,the industry's growth has slowed,added with fierce competition from real estate enterprises,hindered the development of corporate real estate industry.The tightening of the policy environment directly leads to the company's real estate project sales stagnation,that was unable to create profits for the company.On the other hand,due to the aggressive strategic layout,company focused on blind expansion of acquisitions,this resulted in a large number of capital outflow.At the same time,the company's internal governance is chaotic,and financial fraud phenomenon arose,which resulted in further deterioration of the company's operations.Finally,the company's cash flow was interrupted,liquidity gap appeared,and bond default broke out.At the end of 2018,the company was delisted from the shenzhen stock exchange because the closing prices were below the face value of the shares.This paper takes the bond default of zhonghong holding company as an example,firstly introduces the basic situation of the company,sorts out the specific process of bond default,and lists the detailed information of defaulted bonds.Then,based on the course of the event,the case analysis is conducted from three parts: the cause of the default,the consequence of the default and the disposition of the default.In order to identify the risk factors of bond default clearly,this paper focuses on the cause analysis of bond default,and finds that the study of bond default factors can be divided into three periods: the first period is the period of risk germination,the second period is the period of risk accumulation,and the third period is theperiod of risk outburst.In addition,the default factors are interrelated to form a transmission chain.As the bond maturity is approaching,the default risk accumulates through the factor transmission chain and finally leads to the bond default event.What's more,this paper also discusses the consequences and chain reaction of bond default on the issuer,and analyzes the subsequent disposal of defaulted bonds and its effect.Finally,the experience of this case provides enlightenment for other issuers in strategy formulation,corporate governance and the disposal of default..It is hoped that the research in this paper can provide supplement and support for the research content of the relevant bond market,provide reference opinions and decision basis for all sectors of society,and eventually promote the healthy and stable development of the bond market.