Sunshine City Perpetual Bond Financing Case Study

The real estate industry occupies an important position in our national economy,but for a long time,the financing problem of real estate has been the most important issue in the industry.The main reasons for its financing difficulties can be explained from both internal and external aspects: from the company's internal point of view,the real estate industry needs a huge amount of capital,and needs long-term cash flow,so it has a high asset-liability ratio,making it difficult for enterprises to refinance.From the company's external environment,the introduction of relevant national policies has constrained the development of the industry,the scale of bank credit loans has been greatly reduced,and there are many restrictions on the use of trust financing in real estate.Therefore,in the internal and external environment,how to increase the financing methods of real estate enterprises to meet the needs of enterprises for funds,while not raising the asset-liability ratio of real estate enterprises,improving the capital structure of enterprises has become a difficult problem to be solved urgently.And sustainable debt can meet this demand of the real estate industry.Firstly,it has fewer restrictions on issuance,which is very attractive to enterprises with poor refinancing ability.Secondly,its equity-debt nature makes it a liability,but it is included in equity,so as to meet the requirement of enterprises not to increase the asset-liability ratio in the case of cash flow.However,this kind of financing mode has just developed in China,and its application in real estate enterprises is not very extensive,and the domestic research on its application is still relatively small.Therefore,this paper chooses Sunshine City of A-share market as a case to study its financing behavior of issuing sustainable debt.This paper uses case study method,taking Sunshine City as an example,based on capital structure theory,pecking order financing theory and financial contract theory,firstly combs the literature of domestic and foreign research on Sustainable debt,and then comprehensively collates the situation of sustainable debt issue in China.Because of the characteristics of sustainable debt servicing equity servicing debt,most enterprises in the real estate industry issue sustainable debt to full.Full capital demand,achieve strategic objectives,reduce the demand for asset-liability ratio,reduce financing costs,reduce capital use constraints and so on.Although there are many advantages in issuing sustainable debt,which will not dilute shareholders' rights and interests,the hidden risks can not be underestimated.While reducing the asset-liability ratio,the financial risks behind the company can not be ignored.Under the interest rate jump mechanism,if the company fails to repay in full,it will need huge pressure to pay interest,and may damage the reputation of the company,stock price decline and so on.Therefore,this paper puts forward the following measures and suggestions to the company and the regulatory authorities: for the company,when issuing the sustainable debt,the company should consider the pressure of interest repayment in the later period of issuing the sustainable debt in accordance with the company's own ability.At the same time,we should carefully choose the timing,and make full use of the efficiency of the use of funds when the pre-maturity interest rate of sustainable debt is relatively low.For the regulatory authorities,we should establish a sound system of sustainable debt,so that listed companies can fully disclose the relevant information of sustainable debt,and avoid influencing investors to make correct decisions.