Case Study On Bond Default Of Yongmei Group

China’s bond market started in 1981,after 40 years of vigorous development,the rapid expansion of market size,the degree of opening up to the outside world to further expand.By the beginning of 2020,China’s bond market scale for the first time exceeded 100 trillion yuan,growing into the world’s second largest total bond stock economy.In 2014,China’s first substantive bond default event “11 Super-japanese debt” broke the myth of zero default of “rigid payment” in the domestic bond market.By the end of 2020,China had 681 defaulted bonds,amounting to 420.702 billion yuan.Yongmei Group is a large state-owned coal enterprise in Henan Province with a registered capital of RMB 34.9 million.It is one of the top 500 enterprises in China and one of the top ten enterprises in the national key industrial sectors.It strives to build a diversified enterprise with coal as the main industry and the common development of upstream and downstream industries.On November 10,2020,Yongmei Group announced that “20 Yongmei SCP003” can not pay the principal and interest in full on time,which has constituted a substantial breach of contract.The bond default of Yongmei Group has a great negative impact on the credit of state-owned enterprises,Henan enterprises and coal industry.Taking the debt default of Yongmei Group as an example,this thesis analyzes the internal and external factors of enterprise default,and puts forward relevant enlightenment to bond issuers,regulators and investors.This thesis uses a combination of theoretical analysis and case studies.The theoretical part introduces the theories related to bond financing and bond defaults.The case analysis part firstly introduces the history,business overview,operation status and bond issuance of Yongmei Group and the reaction of parties after default.Next,the case is analyzed from three aspects: internal and external causes of bond default,bond default warning and consequences.The case analysis finds that:(1)external factors such as macroeconomic environment and coal industry in the "painful" period of transformation,and internal factors such as lack of advanced corporate strategy,weakened profitability,high debt servicing pressure,over-reliance of parent company on subsidiaries,and risk of repayment and credit risk are the main reasons for bond defaults of Yongmei Group;(2)This thesis selects the financial data of 40 bond issuers to construct the ZETA model and calculates the ZETA value by substituting the data of the five years before the default of Yongmei Group to evaluate the default possibility,and the study shows that the model has better bond default discriminatory ability and certain practicality;(3)The bond default of Yongmei Group brought about the consequences of bond price fluctuation,main rating bond rating decline and triggered market liquidity risk.This thesis concludes with suggestions for bond issuers,regulators and investors in light of the findings of the case study.First,issuers should optimize the industrial layout to cope with external risks,be alert to the risk of excessive competition in the industry,formulate reasonable corporate strategies and make timely adjustments and appropriate financing;second,regulators should accelerate system construction,strengthen system support,increase penalties,enhance independence and use appropriate financial statements in rating.Third,it is recommended that investors should increase their knowledge base,strengthen their psychological expectations and reasonably use bond default warning models to assess risks.