A Case Analysis Of Fuguiniao Corporate Bond Defaults

After years of continuous development and improvement,China's bond market now has a rich variety of trading,diversified trading subjects,and its scale is growing.By the end of2018,the stock of China's bond market reached 86 trillion RMB,ranking third in the world.However,while the bond market is booming,bond default incidents are also accompanied.Since 2014,China has witnessed the first bond default event.In the following years,the default event has not stopped,but has been increasing,which exposes the credit risk on a large scale.In 2018,the number and amount of defaulted bonds in China's bond market reached a new high.This year,the number of defaulted bonds reached 123 issues,which exceeded the total number of defaulted bonds in the previous four years.This has aroused great concern of the participants in the bond market and cast a cloud on the bond market.This paper takes Fuguiniao Company,which declared a bond default in April 2018,as an example,and through in-depth analysis of the causes of the default,draws the corresponding enlightenment and suggestions,hoping to have a certain practical significance for the future operation of other companies and strengthen market supervision.Firstly,this paper gives a brief introduction to the basic information,business model and operation status of Fuguiniao Company,and describes in detail the development process from spontaneous debt to default declaration.Secondly,from the perspective of internal and external causes,it makes a thorough exploration and analysis of the company's financial situation,operation and management status and external environment,trying to find out the causes of bond default.This paper holds that Fuguiniao Company is facing the situation of macroeconomic downturn and low prosperity of shoes and clothing industry.There are confusion in its internal management strategy,inadequate internal control and management,poor profitability,and the existence of funds lending,illegal external guarantees and other acts.The superposition of various factors causes the company's capital chain to break,and it is difficult to repay the principal and interest of bond maturity.The default of company bonds happened.Thirdly,according to the above reasons,we put forward some enlightenment and suggestions to prevent the occurrence of bond default.The one is from the corporate level,this paper argues that the shoe and clothing industry should actively seek the path of transformation.It is necessary for the company to establish a risk early warning mechanism to monitor the company's risks and improve the company's internal management ability.The two is from the regulatory level,it is believed that strengthening the credit awareness of the issuer plays an important role in preventing bond default,and the rating level of rating agencies should be improved.We will speed up the management of irregular guarantees and strengthen the supervision over the disclosure of information about the debtor.Finally,the following conclusions are drawn: One,the poor operation of the company and the decline of its profitability are the fundamental reasons for the default of Fuguiniao bonds;Two,the company has a huge amount of irregular guarantees and fund lending,which further deteriorates the company's cash flow and directly leads to the occurrence of bond default;Three,the prevention of the default of bonds requires the joint efforts of the issuing company and the regulator.