A Case Study On Default Of Bonds In Environmental Protection Industry

It is an important way for enterprise financing by issuing bonds.Since 2005,credit bond market has developed rapidly in China,and the number and scale of bond issuance have increased dramatically.However,the overall credit risk levels are also being accumulated on the marketwith the expansion of the bond market.The credit default has been a constant occurrence after a breach of "11-day debt" in 2014.According to statistics,124 new default bonds were added in 2018 and the total amount of default was 120.561 billion yuan,which was 257.23% higher than the previous year.It can be seen from this that the default situation of debt issuing enterprises is serious.How to prevent the financial risk of debt issuing companies has become an urgent problem.From a detailed study of the industries where the bond default occurs,we can see that different industries have different degrees of default,and the environmental protection field with rapid development has become a disaster area.Only in 2018,Shengyun Environmental Protection,Shenwu Environmental Protection,Kaidi Ecology,Oriental Gardens and other bond defaults occurred to varying degrees.This is not only because the environmental protection field is characterized by high leverage,high investment and long cycle,but also because some environmental protection enterprises blindly expand and ignore financial risks in the process of development.The default of Shenwu environmental bonds occurred in the context of supply-side reform and financial deleveraging,and is a typical case of environmental protection enterprises suffering from financial crisis.Shenwu,an environmental protection company with prominent core technologies,failed to pay interest on March 14,2018 on its "16environmental protection bonds",which constitutes a material default.Inthis paper,the default event as the research object,to explore the causes of financial distress of environmental protection enterprises,andcombining qualitative and quantitative strategies from macroeconomic background and micro corporate development strategy to fully explore the cause of the risk of their default;using the financial dilemma theory,the project risk assessment model,the financial crisis metric model and so on to explain and analyze the environmental breach of the gods,and to provide the environmental enterprises health and development,and the proper financing for the enlightenment and the reference.It was found that if that associate transaction is severely serious and the risky nature of the project under construction is large,the investor will reduce the risk preference;the drying up of liquidity caused by excessive accounts receivable is the most significant reason for the occurrence of the default event of Shenwu environmental bond.Finally,this paper proposes that environmental protection enterprises should strengthen financial management,especially in the case of cash flow;keep the pace of development and avoid blind expansion;expand financing channels,maintain enterprise liquidity and other targeted countermeasures and Suggestions.