Can Cross-default Clauses Protect Interests Of Creditors?

Since the reform and opening up,the scale of China’s bond market has developed rapidly and has now become the third largest in the world.However,the investor protection mechanism of China’s bond market has not been improved.In recent years,the frequent occurrence of bond market defaults has seriously affected the healthy development of the bond market.Cross default clause is a kind of bond currently used more widely restrictive clauses,bond investors hoping to terms and conditions to reduce the information asymmetry between the issuer and the problem,but current cross default clauses used in the practice more bonds instead,the company has a huge debt crisis,so the cross default clauses for bond investors protection have important theoretical and practical significance.Bonds in order to be able to better protect the interests of investors,and put forward effective advice,this paper analyzes the types and principle of the mechanism of bond investors protection,and explores the principle of cross default clauses,the setup of legal compliance and the use of motivation,in-depth analysis of the process of cross default Yongtai energy bonds,bond investors to use cross default clauses protection effective Suggestions,healthy and long-term development of our bond market,and provide reference to protect the interests of the bond investors.Taking the case study as the research method,this paper selects Yongtai energy co.,ltd.to study the cross-default clauses and the protection of cross-default clauses on the interests of bond investors.First of all,this paper finds that the cross-default of bonds will lead to negative market reaction,negative effect on financial performance,and loss of company value,indicating that the cross-default clauses cannot protect the interests of bond investors.,this paper is engaged in the former,matter and afterwards the Angle of three cross default clause can not protect the interests of the bond investors,reason has carried on the analysis,found in the cross of default clause of default setting leads to a higher risk of default,embodied in its not set reasonable trigger amount,limited to default subject itself and subsidiaries,and basic covers all financial debt default debt nature;In the process of bond issuance,credit rating agencies failed to pay attention to the risks brought by cross-default clauses in time,and still gave high credit ratings,which misled bond investors.After the bond cross default,Yongtai energy through seeking government help,and Beijing can realize the strategic asset restructuring and disposal company group,trying to ease the debt crisis,but these ways or commit failure,or do not conform to the bond market law of development,or unable to repay the debt in the short term,bond investors claims still have high uncertainty.Through the study of the case,this paper argues that the existence of the cross default clauses in the bond market is able to protect the interests of the bond investors,but need to perfect the current cross default clauses used,so this article puts forward the following Suggestions: one is the need according to the company itself to withstand bond default risk degree set reasonable amount to trigger,main body and the nature of the default debt default;Second,the role of credit rating agencies needs to be strengthened,including the integration of the regulatory system of credit rating agencies,the attempt to adopt a double-rating model,the focus on the design of bond terms in rating,and the improvement of the penalty system for credit rating agencies.The third is to improve the current bond market information disclosure is not timely,the bond market management as soon as possible to establish a special system;Fourth,we should solve the problem of rigid government payment in the current bond market,and solve the idea of the government’s financial support for the current bond default.