Case Study On Bond Default Of Fujian Fusheng Group Co.LTD

With the high-quality development of economy and finance,the issuance scale of China’s bond market has expanded significantly in recent years.By the end of 2022,the balance of outstanding bonds has reached 141.36 trillion yuan.With the continuous expansion of the bond market,bond default events have also occurred one after another.The default of private enterprise bonds has become a serious disaster area in the bond market,and the risk of default has also spread rapidly.Some state-owned enterprise bond default events have even occurred,such as the bond default of the state-owned enterprise Baoding Tianwei Group Co.,Ltd.in April 2015.Subsequently,bond defaults have also occurred in industries such as the coal industry and the real estate industry.Frequent bond defaults have had a significant adverse impact on the healthy development of the production and operation of various enterprises in the industry,as well as a huge impact on the financial bond market.In 2020,due to the continuous strict financing regulation and the three red lines and two centralized policies for loans,the financing of the real estate industry continued to tighten.In 2021,the financing regulation of the real estate industry continued to increase,and the demand side regulation was also continuously upgraded.Real estate sales continued to be sluggish.Since September of the same year,the liquidity dilemma in real estate has continued to spread,and many private real estate enterprises have successively defaulted on their bonds.Fujian Fusheng Group Co.,Ltd.first defaulted on its bonds on November 19,2020,with a total amount of bonds issued in default reaching 1 billion yuan.Fujian Fusheng Group Co.,Ltd.,as a medium-sized real estate enterprise,is representative of its aggressive expansion in the early stage and large default amount.Therefore,under the severe background of frequent bond default events in the real estate industry,studying the bond default of Fujian Fusheng Group Co.,Ltd.has important practical significance.Based on this,this article uses a combination of theoretical and case studies to select Fujian Fusheng Group Co.,Ltd.,a representative real estate enterprise,as the research object of bond default.It analyzes the entire process from bond issuance to default,with the aim of exploring the causes and corresponding economic consequences of bond default,and draws corresponding conclusions and inspiration based on this analysis,With a view to providing reference for bond issuers in the bond market to prevent bond default risks.Firstly,this paper reviews the relevant research literature on corporate bond default from the perspectives of the causes of corporate bond default,the economic consequences of bond default,and risk prevention measures,and elaborates on the concept,characteristics,causes,economic consequences,and related theoretical basis of bond default.Secondly,it briefly introduces the basic situation and bond issuance profile of Fujian Fusheng Group Co.,Ltd.,and reviews the corporate bond default events.Thirdly,from the perspective of the causes of default and the economic consequences of default,this paper focuses on analyzing the bond default of Fujian Fusheng Group Co.,Ltd.In terms of the causes of default,it is mainly due to the decline in economic fundamentals,credit contraction,tightening of real estate regulatory policies,false high credit ratings,delays,and aggressive strategic planning by Fujian Fusheng Group Co.,Ltd.,declining internal control capabilities,and deteriorating financial conditions.In terms of the economic consequences of default,it mainly analyzes the impact of enterprises,investors,credit rating agencies,and the real estate industry.Finally,based on the analysis of the bond default case of Fujian Fusheng Group Co.,Ltd.,the conclusions and relevant implications are drawn.Through a case study of Fujian Fusheng Group Co.,Ltd.’s bond default,the following five conclusions are drawn: First,blind expansion and lack of internal control are the "catalysts" for corporate default;Secondly,the financial situation of the enterprise itself is a key factor leading to default;Third,the tightening of the external economic financing environment increases the risk of bond default;Fourth,bond default affects the healthy development of enterprises;Fifth,bond default damages the interests of investors.At the same time,it provides some enlightenment for companies,regulators,and investors:enterprises should formulate reasonable business strategies and improve the financial early warning mechanism;Regulators should improve the legal system for bond default and strengthen the management of information disclosure systems;Investors should enhance their awareness of risk prevention in the bond market and establish a tracking mechanism after investment.