Study On The Economic Consequences Of Perpetual Bond Financing Of Hainan Airlines

Perpetual bond is defined as a bond with no clear repayment date,the investors can't get their principal at a specific time,but they can get their interest at a fixed time.China's bond market began to appear some "sustainable" financial instruments,such as long-term rights in the renewable bond.It is a kind of financing instrument between debt and equity,and it is determined as debt capital or equity capital according to whether the terms include "redemption at maturity" and "delayed payment of interest".If a sustainable bond was identified as equity capital,it can ensure control of companies.at the same time,it make the enterprise gain more rights and interests and avoid the adverse influence as debt capital on the enterprise's finance,in order to obtain money,many enterprises that don't want to have too much debt pressure often choose to sustainable bond measured as equity capital.However,the perpetual bond can not be "continued" all the time,and the cost is relatively high,and it cannot truly reflect the asset and liability situation of the enterprise,which will generate problems such as debt risk in the financial management of the enterprise.Perpetual bonds,a new financial instrument,was first proposed in China in 2013 and perpetual bonds will enter the exercise period one after another in 2018.Therefore,issuers need to consider the problem of redemption of perpetual bonds.Hainan airlines publicly redeemed the perpetual bonds in September 2018 and the receipts totaling 2.5 billion yuan,but abruptly announced a month later that it would not exercise the right to redeem the bonds.Therefore,the analysis of the example of Hainan airlines can explore the changes in the economic benefits of enterprises after the use of sustainable bond financing,so that offering some suggestions for enterprises who want to use this financing method.Therefore,this study will analyze the economic consequences of sustainable bond financing mode on enterprises based on the example of sustainable bond of Hainan airlines.The research will start from the background and significance;Then,it will integrate and sort out the literature on the motivation,terms,risks and impacts of perpetual bond issuance.Secondly,it defines the concept of sustainable bond and economic consequences,and introduces the theory and market development of sustainable debt.Further study on the motivation of Hainan airlines to adopt sustainable debt financing,focusing on the analysis of economic consequences of Hainan airlines through sustainable bond financing.The analysis of economic consequences will be carried out from the following perspectives:financing costs,financial benefits,risks and market effects.After analyzing the perpetual bond of Hainan airlines,it is concluded that on the one hand,perpetual debt can timely solve the problem of insufficient capital of enterprises and improve the debt structure of enterprises;on the other hand,perpetual debt can also bring financial risk,credit risk,policy risk and other problems to enterprises.At the same time,the optimal stopping model is used to calculate the cost of perpetual bond redemption.It is found that the issuance of perpetual bonds has negative effect on stock price,while redemption has positive effect.Finally,this paper provides feasible suggestions for sustainable bond issuers to promote the positive and healthy development of the sustainable bond market.