Research On The Reasons And Countermeasures Of Taihe Group’s Bond Default

Since China has entered the new economic normal,the economic growth rate has shifted gears and macroeconomic risks have intensified.In the bond market,default risk has become more and more prominent since 2014,with frequent defaults.Strict real estate regulation has made it the industry with the highest default risk,with the amount and number of defaults hitting a record high and topping the industry.In order to study the reasons for the outbreak of default in real estate and to prevent the default risk in the industry,this paper conducts a detailed study on the causes and response strategies of bond default of Taihe Group based on the supply and demand theorem,real estate cycle theory,capital structure theory and option pricing theory.This paper first uses the KMV model to measure the default risk of Taihe Group,analyzes the default risk of the company and conducts default warning analysis for outstanding bonds.Then,we conduct a comprehensive review and review of Taihe Group in terms of business operation,default process,rating adjustment and response measures,based on which we analyze the reasons for Taihe Group’s bond default from three levels:macro,industry and company.Finally,based on the causes,relevant suggestions are made on the control strategy of default risk of Taihe Group,and corresponding insights are drawn on the real estate industry to prevent credit risk.The main conclusions of this paper are as follows:First,the KMV model can effectively identify the default risk of Taihe Group and suggests the risk earlier than the credit rating wind;the model also warns about the company’s outstanding bonds.Second,the macroeconomic downturn is the causal factor for Taihe Group’s default.The regulatory policies of the real estate industry,the deviation of industry supply and industry inflection point,and the inherent highrisk factors of real estate are important reasons for Taihe Group’s default.Third,the chaotic corporate governance within Taihe Group,the company’s strategic decision-making mistakes,the excessive cost of debt,the aggressive capital structure and the inferior cash flow are the root causes of the default.In order to control the risk,the following measures are recommended for Taihe:first,seize the phased policy opportunities;second,actively restructure the debt;third,sell the non-performing assets;and fourth,transform to an asset-light model.In order to prevent the risk of default in the industry,the administration should adopt policies that can stabilize the expectations of real estate enterprises and promote a virtuous market cycle;reduce the reliance on land finance;and provide support for mergers and acquisitions in the real estate industry.Real estate enterprises need to use leverage wisely,optimize their capital structure and pay attention to the impact of the industry’s inflection point.