A Research On Bond Default And Bond Default Resolution In China

On March 4^th,2014,the Chinese bond market ushered in the first substantial breach.*ST CHAO RI made an announcement to say that they can’t pay the due interest of 89.8 million RMB on March 7,2014,instead they can just pay 4 million RMB,which is only account for 4.5%.At this point,“11 CHAO RI Bond” officially declared a default,it also declared a default in the public offering bond market where never has a default before.After the default of “11 CHAO RI Bond”,the credit risk regularly took place in the bond market,credit risk spreads from private enterprises to state-owned enterprises,drawing public’s close attention.This article takes “11 CHAO RI Bond” as an example,focuses on the solution of bond default,take a close look at on the reasons of bond default and details of bankruptcy reorganization,then makes some suggestions on the risk prevention,solutions of bond default and bond market supervision.Default is the normal performance of the bond market,and for a long time in our country bond defaults were solved by the government,make the credit risk of China’s bond market to be hidden,which is not conducive to the bond market asset pricing and rational allocation of resources.In this case,investors chasing high-yield bonds,ignoring the default risk of the bond itself.With the development of China’s bond market,after “11 CHAO RI Bond” default,bond market broke out a lot of credit defaults,and always resort to government to solve the default obviously doesn’t work.We need to perfect the related legal system of bond defaults.After general bond defaults,the creditor and the debtor has two kinds big bond default disposal ways,the first category is private debt restructuring,the second type is based on the default disposal way under the "bankruptcy law",respectively,bankruptcy liquidation,bankruptcy reconciliation,bankruptcy reorganization.“11 CHAO RI Bond" default is disposed by bankruptcy reorganization.“11 CHAO RI Bond” default is caused by a series of comprehensive reasons,overcapacity of photovoltaic industry caused product prices went down and restrictions on overseas industrial policy to photovoltaic enterprises operating environment went worse;Lead underwriters didn’t fulfill responsibilities,Pengyuan credit rating agent inflated the rating helped bond default;weak corporate governance and internal control;the actual control person of the company signed the overseas projects without board approval,under the dim prospects in the industry by investing in overseas photovoltaic power station,causing a large number of accounts receivable can’t be repaid,drying up of cash flow,large losses for three consecutive years,eventually lead to bond defaults.“11 CHAO RI Bond” default brings a certain impact to China’s bond market,after balance the comprehensive factors and interest,the company finally chose the bankruptcy reorganization as solution.Bankruptcy reorganization in compared with other disposal methods,is a active way to save the trouble company,seen from numerous bankruptcy reorganization cases,the bankruptcy reorganization’s repayment rate of ordinary creditor is higher than under bankruptcy liquidation,safeguard the interests of small and medium-sized investors,and this method can properly weigh the creditors,debtors,shareholders,government,social interests in balance,after the reorganization,company received good economic effect and social effect.This case provides good ideas and experience to deal with bond defaults in the future.