Research On The Causes Of Bond Defaults Of Private Real Estate Enterprises And Countermeasures For Prevention

Under the background of China’s rapid economic growth,the size of the bond market is also increasing.By the end of 2022,the stock of the bond market has risen to 144.8 trillion,an increase of 7.8% year-on-year.However,behind the rapid development of the bond market is the continuous increase of credit risk.2019-2021 will be the three years with the fastest growth of bond defaults,with an average annual increase of more than 150 billion bond defaults.In particular,in the real estate industry,affected by factors such as macroeconomic downturn and national regulation and control policy changes in recent years,the number of bond default entities is increasing,and private real estate enterprises are the main ones.Frequent bond defaults of private real estate enterprises will have a bad impact on the financial market,investors and other stakeholders,hindering the healthy and orderly development of the bond market and real estate market.Therefore,this article is of certain significance to study the causes of default and risk prevention countermeasures of private real estate enterprises.Based on the existing research results on the causes of bond default and countermeasures,this paper chooses Languang Development,a leading private real estate enterprise in Sichuan Province,as the case study object.First of all,this paper analyzes the development status of the real estate industry and the situation of bond default.Then,the paper introduces the process and influence of Languang Development bond default events,and explores the causes of Languang Development bond default from the macro level,industry level,enterprise level and rating level.Finally,combined with the bond default event developed by Languang Development,suggestions are put forward to prevent bond default risk for regulators,real estate industry,real estate enterprises and credit rating agencies.By studying the causes of bond default of Languang Development,this paper draws the following conclusions:(1)From the macro level,Languang Development faces the dual difficulties of withdrawing funds and external financing due to the great downward pressure of macro economy,the impact of the novel coronavirus epidemic and the "three red lines" financing new policy,and the resulting insufficient cash flow becomes an important reason for bond default.(2)From the perspective of the industry,the profit rate of the real estate industry continues to decline,and Languang Development acquired a large amount of land during the tightening period of regulatory policies,resulting in a serious shortage of cash flow;In addition,the increasing concentration in the real estate industry intensified the market competition,and the huge financing pressure and operating pressure eventually led to the bond default of Languang Development due to the break of the capital chain.(3)From the perspective of enterprises,aggressive expansion and blind pursuit of diversification lead to the occupation and waste of a large amount of funds for Languang Development.The chaotic internal governance of the company reduced the operating efficiency of Languang Development,and the poor financial performance of Languang Development made it difficult to obtain external financing,which also aggravated the problem of insufficient cash flow of Languang Development.(4)From the perspective of rating,as the current rating methods of rating agencies focus more on rating the existing situation of enterprises according to the existing information of enterprises,they fail to fully predict the potential financial risks of enterprises in the future,resulting in the successful issuance of bonds that do not meet the conditions of issuance.When those bonds came due,Languang Development’s cash flow was tight and it eventually defaulted.