A Case Study Of Shengyun Environmental Bond Default

The bond market is an important place for enterprises to raise funds.As the scale of China’s bond market gradually expands and its volume keeps rising,financial risks in the market are gradually accumulating and appearing.Since the myth of rigid payment in the bond market was broken in 2014,bond defaults began to erupt intensively and gradually normalized.This wave of defaults has a wide scope and lasts for a long time.By the end of 2019,almost 500 bonds in China’s bond market have defaulted,and the subjects of defaults have gradually extended from the original state-owned traditional enterprises and traditional industries to private enterprises and sunrise industries.This is a big blow both to the legitimate rights and interests of the debtor and to the sustainable development of the bond market.Therefore,under the current situation,it is urgent for us to explore the causes of bond issuers’ defaults,reduce the probability of bond defaults and promote the long-term healthy development of the bond market.In this paper,Shengyun Environmental Protection Company is taken as the research object,and a series of bond default events occurred in this company are studied in depth by case analysis as well as the reasons are analyzed to obtain enlightenment.First of all,the development of corporate bond in China and the current situation of default are described.Secondly,it introduces Shengyun Environmental Protection’s company profile,shareholding structure,and business conditions,and reviews the default process of Shengyun Environmental Protection’s short-term financing bonds in detail.Thirdly,this article analyzes the causes of Shengyun Environmental Protection’s default from four aspects: external environment,company operation and management,company financial status,and supervision level.The main causes of the default are as follows: under the background of macro-economic downturn,the company has long-term adopted BOT business model with large investment and long payback period,aggressive expansion,and there are large-scale illegal guarantees and related parties’ accounts.This leads to the deterioration of the company’s financial indicators and aggravates the occurrence of financial risks.In addition,the bond market regulators and rating agencies did not play their roles in due course,which eventually led to the breaking of the capital chain and the formation of a default.Finally,based on the established fact that Shengyun Environmental Protection Company is in material breach of contract,the government,companies,regulators and investors are given corresponding enlightenment andsuggestions aiming at the existing problems of enterprises,hoping to provide some reference for other private enterprises.