A Case Study Of Huaxia Happiness Debt Default Based On Modified KMV Model

Since the Ministry of Housing and Construction comprehensively implemented the "three red lines" policy on January 1,2021,China’s real estate enterprises began to face the challenges of tight credit,tight liquidity and even broken capital chain.In early February2021,Huaxia Happiness,a real estate private enterprise giant in Hebei Province,announced that it could not repay some of its debts in time,which further deepened the public’s understanding of the grim situation of the real estate regulation and control.As a hundred billion listed private enterprises,it is of great significance for the credit risk research of Chinese listed companies to study the causes of their debt "thunderstorm".The thesis first introduces the basic situation,main business,company ownership structure and debt restructuring plan of Huaxia Happiness,and then analyzes the causes of bond default in Huaxia Happiness.Firstly,it analyzes the external causes of default from the point of view that the COVID-19 Pandemic affects the purchase demand of property buyers and the regulation and control policy of "three red lines" affects the financing demand of real estate enterprises.Then it analyzes the internal causes of debt default from the perspectives of over-concentrated investment layout,blind entry into the field of commercial real estate,loopholes in corporate governance,difficulties in repayment in industrial parks,over-reliance on leverage and so on.After analyzing the reasons,the thesis then uses the modified KMV Model to quantitatively analyze the credit risk of Huaxia Happiness,and obtains a new debt default point by regressing the data of total assets,current liabilities and long-term liabilities of the defaulting company.The significance test is carried out between the default distance obtained by the modified debt default point and the default distance obtained by the default point whose default coefficient is 0.25,0.5,0.75 respectively.It is concluded that the modified debt default points obtained by the regression model are more suitable for listed companies in China.Then by modifying the default distance it calculates the default point to measure the change of credit risk before and after the default of Huaxia Happy debt.Finally,the thesis provides corresponding suggestions from the two angles of improving the current situation of Huaxia Happiness Company and how to develop the real estate industry,including that Huaxia Happiness should strengthen the management of accounts receivable,optimize the development model,improve the financing management and adjust the debt restructuring plan.The real estate industry should seek transformation and strengthen brand management in time.