A Case Study On Bond Default And Restructuring Of Yongtai Energy

With the rapid development of China’s bond market,credit risk has been accumulating,default events have been emerging in recent years.In 2018,the number and scale of the first defaulters of bonds reached an all-time high.Private enterprises and listed companies were the main new defaulters.This paper choosed Yongtai Energy as a case study,to analyze the reasons for its default,and try to put forward suggestions for restructuring,Yongtai Energy had the largest bond defaults in number and scale of the listed company in 2018.Firstly,the paper introduced the background of the case,then untangled the process of bond default,analysed the internal and external causes of bond default,including:(1)regulatory policy factors,under the strict financial supervision policy,Financing channels for floaters with medium and low ratings have been tightened;(2)company development strategy factors,Yongtai Energy supported its diversified investment with high leverage,the new arranged electric power and Petrochemical trade business did not play a positive role in the overall growth of the main gross profit rate;(3)Company financial factors,Yongtai Energy’s overall asset-liability ratio is high,the rolling pressure of short-term debt is high,the cash flow guarantees the interest to a low degree,the guaranteed multiple is only about 1.Secondly,according to the actual situation of Yongtai Energy,the paper designed two proposals: debt-to-equity swap scheme and strategic investors restructuring scheme.The scheme of debt-to-equity swap is:(1)Establishing fund to raise capital,investing in Yongtai Energy in the form of entrusted loans and trust loans,adjusting debt maturity structure and reducing financing costs;(2)Establishing fund to invest in subsidiaries with high-quality assets of Yongtai Energy,reducing the debt scale of the company and optimizing financing structure.The scheme of introducing strategic investors is to introduce Jingneng Group to obtain its financial support and credit support,to realize the scale effect and reasonable integration of industrial chain on the premise of the same business.Finally,the paper summarized the conclusions of the study,from the aspects of credit rating agencies,issuing companies and investors,gives the Enlightenment of preventing bond default and the revelation of debt restructuring.The main contribution of this paper is through the study of the representative case of Yongtai Energy Company’s bond default,provide a reference for the analysis of the causes of debt default of highly leveraged enterprises under the background of tightening financial supervision and increasing difficulty in financing.The proposed debt-to-equity swap and introduction of strategic investment scheme introduced in this paper also has certain reference value for the restructuring of default cases.