The Research Of COFCO Property Debt-financing Problem

Chinese economy has shown steady recovery since the financial crisis in 2008.Real estate enterprises expand in a significant speed with the economy and the market development.Meanwhile,debt financing is usually chosen by the industry due to its advantages in the current situation.Recently,China launched several tightening policies aimed at slashing the real estate bubble,which saw a great influence on the industry.Many real estate developers have been ignoring the leverage risks and over-investing,eventually,leading to bankruptcy.COFCO Property(Group)Co.,Ltd.(COFCO Property)is one of the sixteen central state-owned real estate enterprises and is under a depression lately.Some aggressive expansion steps taken in 2010 seeking to a way of future survival have some reverse impacts on its money supply chain.The debt-to-asset ratio has increased to a new high of 80 per cent in 2013 with other financial ratios upset the investors.Some national well-known credit rating agencies stated that the company is in a tough position,where its operation did not match the expectation.Expansions caused the lack of sufficient cash flows and the difficulties in repayment of debts therefore caused the risk of bankruptcy.This paper analysis the debt financing issue of COFCO Property,followed by literatures of western researches and conclusions.The paper demonstrates the company's capital structure,debt structure,financing method,financial leverage and the life cycle and exposes the risk of debt financing and why it should not be preferred for the company's future benefits.The solutions are proposed based on company's portfolio and the market needs under current macro economy.The paper suggests that COFCO Property should improve the risk awareness and build up some systems to reduce financing risks and optimize the capital structure and financing methods.Therefore,it might achieve a better and healthier perspective.