A Research On The Way Of Bond Default Disposal In China

In recent years,with the continuous development of China’s bond market,bond financing has developed into one of the important channels of enterprise financing.However,since the first bond default event occurred in China in 2014,when the rigid payment of bonds was broken,risks have been released continuously.Especially since2018,defaults have accelerated significantly,and the number and scale of bond defaults have been increasing,affecting the stability of the bond market and investor confidence.However,due to the lack of a mature default disposal system,the disposal of bonds after default in China has many problems such as long disposal time and low recovery rate.Therefore,it is very important to choose an appropriate way to deal with defaulted bonds efficiently and protect the interests of investors at the same time.In this thesis,the bond default event of Lifan Co.,Ltd.is selected as the case study object.In March 2020,Lifan Co.,Ltd.failed to repay the principal and interest of the second phase of corporate bonds issued by the company in 2016,resulting in a substantial default.Through reviewing the default events and analyzing the reasons leading to the company’s bond default,this thesis further studies the disposal methods and characteristics adopted by Lifan after the occurrence of the default event,and analyzes the reasons for the disposal methods adopted by Lifan from three different perspectives of the company,creditors and local government,the way the company uses the bankruptcy reorganization motives,and the bankruptcy reorganization strategy of Lifan stock in detail.Besides,the disposal effect is analyzed from the changes of the company’s main business,ownershipstructure and financial condition after the disposal,and the results of KMV model are introduced to quantitatively analyze whether the default disposal method is effective and judge whether the company still has the possibility of a second default.Finally,according to Lifan’s default and its disposal methods,this thesis summarizes and analyzes the enlightenment and deficiency brought by Lifan’s case and puts forward relevant suggestions from the company,investors and regulatory authorities.By analyzing the bond default of Lifan Co.,Ltd.,a listed private auto company,and the default disposal methods,this thesis draws the following conclusions.First,the occurrence of bond default of Chinese companies is affected by many factors,external industry prosperity and the company’s own operation and management will affect the company’s default risk.Secondly,it is the best choice for Lifan to adopt bankruptcy reorganization for default disposal under multi-party game,and its specific disposal methods and strategies have certain reference significance for other defaulting companies in China.Finally,through the comparative analysis of Lifan’s management before and after the disposal of default,as well as the change of default risk measured by KMV model,it proves that bankruptcy restructuring is effective to help the company out of trouble and reduce the company’s future default risk.Therefore,after the occurrence of bond default event,only the participants from their own demands,actively negotiate to reach a consensus,can promote the process of default resolution and the improvement of default resolution mechanism.