Case Analysis Of Inner Mongolia Bo Yuan Group Bond Defaults

Financing is the primary factor for private enterprises to expand their scale.For a long time,private enterprises have relied on internal financing,bank loans,equity financing and other financing methods to expand their industries.Debt financing has not been favored by enterprises because of the high interest rate of issuance and the need to repay principal and interest at maturity.In recent years,with the successive issuance of favorable policies in the bond market,the reduction of restrictive clauses on corporate bonds,the relaxation of examination and approval qualification,the gradual expansion of the scale of corporate bond issuance,the enthusiasm of corporate bond issuance has been stimulated.However,while the bond market review is relaxed,some enterprises with poor operating performance attempt to evade the entry of credit rating enterprises by fraudulent financial data,and do not make a comprehensive analysis of the cost of issuing bonds.When the bonds are repaid at maturity,there are difficulties in paying,and they can't really fulfill their obligations and responsibilities for bond repayment.According to Wind statistics,by the end of 2018,240 bond defaults occurred in the credit bond market of China's inter-bank and Shanghai-Shenzhen Stock Exchange.The default scale was as high as 205.206 billion.In2018 alone,124 defaulted bonds were produced,with a default scale of 120.561 billion.The occurrence of large-scale bond default is not only related to the overall macroeconomic downturn,but also closely related to the micro-problems such as cash flow shortage,limited refinancing capacity and large short-term solvency of enterprises themselves.Therefore,it is very necessary to analyze the causes of large-scale bond defaults in China.Inner Mongolia Bo Yuan Holding Group Co.,Ltd.is a large private chemical enterprise in Inner Mongolia.Its main business of natural alkali chemical industry has great scale advantages,regional advantages and the resulting cost advantages.It relies on natural alkali business and gradually expands into the largest domestic large-scale enterprise group integrating natural alkali,natural gas and coal chemical industry.It is inconceivable that such a large and well-capitalized conglomerate will default on its bonds.In view of the large number of private enterprises that have defaulted,the number of default reasons similar to BoYuan Group is quite considerable.Therefore,it is advisable to regard Bo Yuan Group as a typical case of bond default.This paper chooses three default bonds issued by Bo Yuan Group as the research object,trying to explore the truth from the operation of such a special large private enterprise,and to explore the causes of bond default.In terms of research content,this paper firstly explores the macro-background of Bo Yuan Group's bond default events,and understands the general situation of the main business of Bo Yuan Group in the industry.Secondly,under the macro-background analysis,it goes deep into the micro-level,from the direction of fund raising operation,the continuing negative events,the occurrence of substantive default and the completion of debt restructuring.The process is described.Through the in-depth study of the overall event,it is found that the bonds of Bo Yuan Group are concentrated at the end of 2016 and the beginning of 2017.Its soda ash,methanol and coal industries are typical strong cyclical industries.The industry has experienced a serious overcapacity situation in recent two years.Although the Group has a slight profit every year,due to the rapid expansion of the scale of the previous industry,bank loans are too large and utilized.Financial factors and corporate governance factors such as unreasonable financing time limit structure,inadequate company safety management lead to frequent safety incidents,which lead to cash flow interruption and consecutive bond default events.Further,on the basis of the analysis of the causes of bond default,this paper puts forward countermeasures from three main perspectives of bond market,including company perspective,regulator perspective and investor perspective.Among them,issuers can prevent default events from three aspects: moderately expanding the industrial scale,improving the management level of debt paying ability,and preventing the risk of security accidents.Regulators can also prevent default events from happening from unified supervision.In addition,investors should strengthen their investment ability to cope with the development of the bond market with a sharper eye.