Legal Control Of Credit Risk Of SME Private Placement Bond

In May,2012, Shanghai Stock Exchange and Shenzhen Stock Exchange issued small and medium-sized enterprises private placement bonds business trial method and the guide sync to it in succession. It marked the Chinese "high yield bond" or "junk bond" formally come on to scene across the country, and provided new ways to solve the problems of financing difficulties and lack of financing channel long plagued SME. This is a great initiatives of Chinese bond market and share an important significance in enrich and perfect the multilevel Chinese capital market The SME private placement bonds are issued in covenant-lite, with simple procedures and relatively high yields, it favored by institutional investors in the initial stages, nevertheless, the innate feature of high credit risk gradually reveals as such issuance increases, investors become more prudent considering the credit risks it contains. Because of the short history of privately raised bonds, the control and supervision research of it still in the preliminary stage. A deep juristic study of the SME private placement bonds will have positive meanings on both legal practice of the private placement bonds and the establishment and improvement of the multilevel stock market.This paper choose the credit risk of SME private placement bonds as the object of the study, gives an analysis on the legal system on the private placement bond market. The viewpoint is:the credit risk of SME private placement bonds is innate, but a valid legal system will prevent, reduce and defuse such risk, and make full use of the private placement bond’s role in SME development.This paper divided into four chapters:The first chapter falls into three parts:A brief introduction of SME privately placement bonds including the origin and the definition is given in the first part, then state the characteristics of the SME private placement bonds though the tabular comparison of other Chinese bonds. Second part focuses on the understanding of the credit risk of SME private placement bonds from the legal point. Last part presents the contents of SME private placement bonds.The second chapter focus on factors of the credit risk of SME private placement bonds based on three levels:form of the risk; the theoretical analysis of the risk formation; the realistic origin of the credit risk.The third chapter gives a detailed introduction on the development of American high yield bond and the control system of credit risk, and a brief introduction on the development of Europe and South Korea high yield bond and the control system of credit risk or innovative approaches. And gives a reference on the legal control for Chinese SME private placement bonds’ credit risk by the study of high yield bonds’ credit risk supervisory regulations of mature bond market.The fourth chapter focus on preventing credit risk, and the ways to increase efficiency and optimize allocation of resources by analyze the increasing risks of privately placement bonds caused by the liberalization of privately placement bond market. Result as:perfect legal system of credit risk can prevent the credit risk, and its an effective means to balance control and liberty. Hence, this chapter gives a detailed analysis on the legal supervision and management of issuance, information disclosure, credit grading and credit promotion procedures of SME private placement bonds.