Legal Issues On Rigid Payment Of Bond

The bond market is an important part of the capital market and an important channel for financing the real economy.With the rapid growth of China’s bond market and the continuous innovation and diversification of bond varieties,the default risk of the bond market is also accumulating.With the downward pressure of China’s macroeconomic,bond default incidents occur frequently,and gradually become a "new normal" of the bond market.Bond default is a normal phenomenon in a mature bond market,and it is the release of bond market risk.However,in China’s bond market there has always been a "rigid cash" phenomenon,many bond default incidents are coordinated by the local government to eventually be saved.The government’s default disposal leads to the dominance of government credit and the confusion of government credit and issuer’s market credit,which eventually leads to the bond investors’ investment rationality can not be established,and more dependent on the government’s "rigid cash".In order to establish a mature and orderly bond market,we should firmly break the "rigid payment",let the bond investment return to commercial attributes,and make good use of market-oriented and legalized approaches in the disposal of bond defaults.This paper introduces the basic status of the bond market: since 2017,the cost of financing in the bond market has risen,the issuance of bonds has fallen,the default of bonds tends to stabilize and decline,but the risk of default can not be underestimated.The author summarizes the concept of bond default as a broad breach of contract anda narrow breach.However,there is no corresponding legal concept of "rigid cash" originated from the trust industry.With the development of the bond market and the deepening influence of local government on the bond market,the concept of "rigid cash" has gradually appeared in the bond market.In the second chapter,the author analyzes the nature of "rigid cash" from the legal perspective,and divides "rigid cash" into active "rigid cash" and passive "rigid cash".In the active "rigid cash" behavior,due to the different subject of fulfilling obligations,it can be divided into bond issuer’s active "rigid cash" and guarantor’s active "rigid cash".Passive "rigid cash" refers to the bond issuer based on various pressures,in the face of the bondholder unreasonable cash request still choose "rigid cash".The author believes that the main causes of "rigid cash" are the disorder of decentralized supervision,the internal impetus of local governments,the confusion of investors’ understanding of the nature of bonds,the imperfection of information disclosure mechanism,the weakening of bond credit rating,and the difficulty of using bond default relief mechanism.The existence of "rigid payment" of bonds will infringe the rights and interests of other stakeholders and is not conducive to the orderly development of the bond market.In the third chapter,the author introduces the existing legal approaches to the disposal of securities default,including the use of external credit enhancement measures,the disposal of collateral and the issuer’s self-financing,debt restructuring,litigation claims and bankruptcy proceedings.The author analyzes that the existing legal channels are difficult to break through the dilemma of "rigid payment",mainly due to the lack of uniformity of legal regulations,inadequate regulation of commercial autonomy contracts,limited ability of bond trustees,and insufficient cooperation of default disposal subjects.The author puts forward some countermeasures to break the "rigid payment" : establishing an effective and limited administrative guidance mechanism,strengthening the bond contract design,perfecting the bond trustee system,perfecting the bond information disclosure system,and making full use of the bankruptcy claim system.