Research On Risk Analysis And Control Of Infrastructure REITs In China

Under the background of China's infrastructure entering the stock age,short-term economic pressure,and high local government debt,in April 2020,the National Development and Reform Commission and the China Securities Regulatory Commission jointly issued the "Notice on Promoting the Pilot Work of Real Estate Investment Trust Funds(REITs)in the Infrastructure Sector",which is undoubtedly conducive to attracting social capital to participate in infrastructure construction,updating and upgrading,and broaden financing channels in the field of infrastructure.In order to ensure the healthy and rapid development of infrastructure REITs,it is necessary to pay more attention to the possible risks.This paper selects Shanghai-Hangzhou-Ningbo-Huihang Expressway REITs as the main body of case analysis.After introducing the basic information of asset-backed securities,transaction structure,original stakeholders and other participants,as well as the basic assets,This paper makes a qualitative and quantitative analysis on the risks faced by REITs of Shanghai-Hangzhou-Ningbo-Huihang Expressway.Qualitative analysis is mainly carried out from the risks related to basic assets,risks related to the subjects and risks related to special plans.It is found that the change of expressway toll policy,fluctuation of project company operating net income,restriction of equity transfer and non-compliance of assets will bring risks to the basic assets of the project.The subject-related risks mainly involve the decline in the cash flow of the original stakeholder,the moral hazard of the plan manager and the fund manager.The risks of the special plan mainly include restrictions on public offerings,changes in interest rates and overtaxed.The quantitative analysis part mainly measures the cash flow risk of basic assets and original stakeholders.By analyzing the coverage multiples and sensitivity of the underlying asset operating net cash flow to the principal and interest of the priority asset-backed securities,it is found that compared with the growth rate of average vehicle unit price,the annual section flow growth rate of expressway has a greater impact on cash flow coverage multiple.Under normal circumstances,the cash flow coverage multiple ofthe basic assets is far greater than 1.However,under the extreme scenario where the novel coronavirus pneumonia epidemic has continued,the cash flow coverage multiple of basic assets has dropped significantly.Due to the sharp drop in expressway income,the original equity holders cannot fully fulfill the obligation to make up the difference,or it will have an adverse impact on the holders of priority asset-backed securities.Finally,the paper puts forward the risk prevention and control suggestions of infrastructure REITs in China: in terms of basic asset-related risk prevention and control,it is necessary to select underlying assets with continuous and stable cash flow,strengthen the supervision and management of the project company and clarify the transfer policy of infrastructure assets;in terms of main body related risk prevention and control,we should pay attention to the operating income status of the original stakeholders,and conduct due diligence on the main participants;In terms of risk prevention and control related to special plans,the structure of "public funds + special plans" can be implemented and financial instruments can be used to hedge interest rate risks,and the legal system related to infrastructure REITs can be improved and tax support policies can be clarified.This research can not only help special plan managers and private equity funds and other professional institutions to take effective measures to avoid risks in issuance and operation,but also help the holders of priority asset-backed securities identify and prevent risks.With the reduction of risks,China's infrastructure REITs are bound to usher in a broader development prospect.