A Case Study On Perpetual Debt Financing Of CGGC

Under the new economic normal,many large construction companies have gradually changed their business models under the influence of economic downward pressure.From the original single project implementation contracting model,they have developed to the new model of PPP,EPC + F,BOT and other industrial and financial integration,and have begun Implement an integrated strategy to expand company boundaries,build a diversified business system,and seek new profit growth points.The transformation of the business model and strategic model has caused the originally large demand for funds,and construction companies with high debt status are facing greater pressure on funds.The policy requirements are contradictory.Therefore,many large construction companies,especially state-owned construction companies,have begun to explore new financing tools to broaden financing channels to meet their own financing needs.Among them,the hybrid financial instrument-perpetual debt is welcomed by many large construction companies because of its non-fixed maturity date and its ability to be included in equity.However,the time it takes to land in China’s capital market is relatively short,and the economic consequences for the company have not yet been unified.Therefore,this paper selects a large state-owned construction company-China Gezhouba Group Company Limited(CGGA)as a case study object to study the practice process of perpetual debt financing and the financing effects generated after issuance.Based on the review of the perpetual bonds related literature and the introduction of concepts,this paper explores the company’s perpetual debt financing motivation in combination with the operation and financing status of CGGA;The design conducted a detailed analysis,and studied the compliance and rationality of the tax treatment of the company’s perpetual bonds according to the policies issued in China;then,the indicators were selected from the four aspects of cost,income,risk,and capital structure to analyze the perpetual bonds financial effect after financing and related risks are summarized;Finally,this paper summarizes the case of CGGA ’s perpetual debt financing,and makes recommendations from the careful choice of issuance timing,efficient use of funds,detailed clause design,and standardization of accounting treatment.This paper is expected to make a comprehensive introduction of the relevant characteristics of perpetual debt and an in-depth study of the financing process and economic consequences of perpetual debt of CGGA,so that the market can better understand the new financing tool of perpetual debt,and provide reference for similar enterprises to issue perpetual debt financing,so as to provide a reference for the regulatory authorities to improve their policies.