Case Analysis Of Private Enterprise Bond Default

The bond market is an important financing place to promote the development of the real economy.Since the 1980 s,China’s bond market has made significant progress and has now become the second largest bond market in the world.However,with the development of the bond market,the risks of bonds have also become increasingly apparent.According to Wind data statistics,in 2019,there were 178 defaults in China’s bond market,with defaults exceeding 140 billion y,39 new default entities,and private enterprises accounting for more than 75%.It can be seen that private enterprise defaults on bonds are still serious.The frequent occurrence of private corporate bond defaults has a great impact on market confidence,dampens investor confidence,raises the work requirements of rating agencies,and further increases the difficulty of financing private enterprises.Therefore,analyzing the reasons for the default of private enterprises’ bonds and estimating the changes in risk is of great practical significance for investors and rating agencies to evaluate bonds and to reduce the default risk of other bond issuers in the industry.The Pangda Company in this case study was a new default entity in the first half of 2019.The group was a leading auto dealer,but became the first company in the industry to default because of lack of funds.This article mainly used the large group bond default event as a case study to explore the reasons for the default of private corporate bonds,and gave market participants some inspiration based on the reasons.In the research process,this article first summarized previous scholars’ research on bond defaults,and sorted out the contents of bond defaults from three aspects;secondly,it briefly introduced the theoretical basis of bond defaults and the current state of default in Chinese bond market;and then introduced Pangda Company bond default case,analyzed the basic situation,default process and disposal of large groups;then combined the previous literature review and conclusions from theoretical introductions to analyze the reasons for Pangda Company bond defaults from the macro,dealer industry,and corporate aspects,and used the KMV model The Z-Score model to evaluate the changes in credit risk of large groups in recent years and explore the applicability of the model.Finally,combining the reasons for default,credit risk assessment,and rating information,and making corresponding suggestions for three issues including bond issuers,investors,and credit rating agencies.The study found that the reasons for the default of Pangda Company bonds included: macroeconomic downturn affecting consumer spending enthusiasm,slowing growth of social financing due to deleveraging,and changes in international situations increasing the risk of exchange rate fluctuations;high leverage at the auto dealer industry.The operation increased operating risks,and the profitability of companies in the industry was relatively passive.The industry suffered serious damage in 2018.At the company level,Pangda Company had problems such as aggressive development strategies and untimely information disclosure.Coupled with the instability of the company’s profitability and blocked refinancing,the funding gap increased.In addition,through the analysis of the model results,it was found that the company’s credit risk changed significantly in the past few years,and the rating results had not only lagging but also falsely high.To this end,this paper recommended that private bond issuers pay attention to macroeconomic changes and industry development trends,and establish early warning mechanisms to improve risk identification capabilities.Investors were advised to combine multiple factors to evaluate bond risks,and attach importance to follow-up risk tracking.Credit rating agencies should strengthen the objectivity of the rating results and take disclosure of the ratings seriously.