Yongtai Energy Bond Default Case Stud

At present,China’s bond market has made a leap forward development.The rapid development of the bond market is accompanied by the normalization of bond default.Especially in 2018,the bond market set off a wave of defaults,with the amount and quantity of bond defaults being so large.The subject of default is also spreading,not only in private enterprises,but also in some state-owned enterprises,which also involve all walks of life.The frequent occurrence of bond defaults has brought great impact to China’s bond market.Therefore,in this context,how to effectively prevent the occurrence of bond default and what measures to take after bond default,so as to resolve the credit risk is an urgent problem to be solved.Yongtai Energy Co.,Ltd.defaulted on its bonds for the first time on July 5,2018,becoming the largest private enterprise with the largest number and amount of defaults that year.Therefore,this article selects Yongtai Energy as a case company,and first elaborates the research background,significance,content,and methods.Secondly,through reading a large number of literature,I have sorted out the relevant theories of bond default,and introduced the overview of Yongtai Energy Company and the status of bond default.Thirdly,it makes a comprehensive analysis of the reasons for the default of Yongtai Energy Bonds from the macro environment,industry development,company development strategy,and company financial situation.Through research,it is found that the reasons that affect Yongtai Energy’s bond default include the following four aspects: First,in terms of the macro environment,Yongtai Energy is facing economic downturn,financial regulation is becoming stricter,and so on;Second,in terms of industry development,the industry prosperity has declined.In the two main businesses of Yongtai Energy,the coal industry has overcapacity,the coal price has fluctuated at a low level,and the power industry has increased the price of steam coal,increased the use of new energy for power supply,and severe thermal power surplus;Thirdly,in terms of company development strategy,the company’s investment strategy is too radical,financing difficulty increases,and there is a high proportion of equity pledge;Fourth,based on the analysis of the company’s financial situation,it is found that the company’s profitability has decreased,with excessive expense burdens,excessive liabilities,insufficient solvency,reduced operating capacity,low asset utilization efficiency,and deteriorating cash flow,resulting in significant capital flow risks.In addition,by using the Z-score financial risk early warning model,it is found that there is a serious lag in the credit rating of China’s rating agencies.Based on the analysis of the reasons for the default of Yongtai Energy bonds,this thesis further analyzes the subsequent disposal of the default of Yongtai Energy bonds.Yongtai Energy mainly solves the problem of bond default by seeking help from the government,establishing the Yongtai Group Debt Committee,selling the company’s assets,and implementing debt restructuring.Finally,at the end of 2020,it announced that all bond defaults have been handled.Through the analysis of the effect of Yongtai Energy’s default disposal,it is found that the company’s financial situation has been improved,the probability of re-default has been reduced,and the bond default disposal measures taken by the company have significant effect.In addition,after the completion of the disposal of Yongtai Energy bonds’ default,the company’s equity structure has been optimized,the share capital has increased significantly,the debt problem has been solved,the asset-liability ratio has decreased,and the company’s core competitiveness has been improved.Finally,this article draws inspiration for companies based on the prevention of ex ante bond default and the disposal of ex post bond default.In terms of prevention of ex ante bond default: For bond issuing enterprises,they should always pay attention to macroeconomic changes and industry development,reasonably plan their strategic layout,avoid blind expansion,reasonably formulate financial development plans,improve the efficiency of fund use,establish a financial early warning system,and avoid falling into financial difficulties;For credit rating agencies,it is necessary to improve the supervision system and information disclosure system of credit rating agencies,while improving the independence and authority of credit rating agencies;For regulatory agencies,they should continuously improve the legal system of securities regulation,standardize regulatory standards,and strengthen the supervision and management of credit rating departments;For investors,improve risk prevention awareness and promote diversified investment to reduce investment risks.In terms of ex post bond default disposal: The company should formulate a feasible debt restructuring plan based on its own situation,stabilize the company’s production and operation,and also seek external support to ensure the smooth progress of the disposal work.