Risks Of Perpetual Bond Issuance In Large State-owned Construction Enterprises

Since 2013,the first perpetual bond was successfully issued in China,perpetual bonds have ushered in a wave of issuance in recent years.After the "de-leveraging" policy was proposed in 2015,some state-owned enterprises began to use perpetual bonds as a tool to achieve the SASAC's deleveraging goals,especially construction companies which has heavy debt.According to the Wind database,till 2019,the stock of perpetual bonds reached a scale of 2.67 trillion yuan.From the perspective of corporate attributes,95.25% of the issuers were state-owned enterprises.From the industry perspective,construction industry is the largest issuer,which accounts for 22.80%.But recently,due to policy changes and the arrival of the perpetual bond redemption period,the risks of perpetual bonds has gradually been exposed.Based on the above phenomena,this article selects large-scale state-owned construction enterprises as the research object,and puts forward the core research problem: the risk of perpetual bonds in large-scale state-owned construction enterprises.The research idea of this article is that the analysis of the issuance of perpetual bonds in large construction companies,CGGC is a typical case,so this article selects it as the case object.First,the article briefly summarizes the current status of perpetual bonds issuarance of CGGC.Second,the risks of perpetual bonds financing are identified from both external and internal perspectives.Aiming at the identified risks,combined with the current policies of perpetual bonds in China and the situation of the company,we conduct a risk assessment,make judgments about the financial impact that may occur when the risks occur,and finally put forward risk countermeasures for perpetual bonds issuarance.The research conclusion of this article is as follow.The main internal and external risks of perpetual bonds are as follows: the risk of accounting policy changes;the heavy pressure of interest payment;the risk of redemption at maturity,these risks are likely to affect the company's leverage level,profit and loss,and solvency,which also cause negative impact of financial liquidity.In view of the above risks,risk management countermeasures are proposed,that is,reasonable design of perpetual bond clauses,control of interest costs,reasonable arrangement of capital turnover and timely redemption,and timely attention to policy changes.The main innovations of this article are as follows: 1)This article takes case studies as the main method and innovatively selects the issuer with both construction industry and state-owned enterprise as the research object.Because of the current policy and market issuance,such issuers are more motivated and representative in issuing perpetual bonds.2)Identify and analyze the risks of perpetual debt financing from both external and internal perspectives.3)When analyzing the risks of perpetual bonds financing,the article combins with the latest perpetual bonds policy.