Study On The Causes And Solutions Of Bond Default Of Private Enterprises

In the context of the deepening propulsion of supply-side structural reform,private enterprises are affected by the "three deleveraging" policies of "cutting overcapacity,destocking and deleveraging".The slowdown of economic growth,the limitation of external financing and the problems exposed by private enterprises lead to the continuous outbreak of bond defaults of private enterprises.They once became the main object of concern in the bond default events in China.Many Chinese top 500 large private enterprises defaulted on their bonds,and even went into bankruptcy restructuring procedures,which seriously weakened China’s private economy.At the same time,under the dual influence of policy tightening and credit damage,the problem of financing for private enterprises is worsening.This will not only increase the difficulty of resolving the default of private enterprises,but also may affect the outbreak of bond defaults of more private enterprises.Large-scale "default wave" may continue,and the overall economy of private enterprises will not grow,which runs counter to General Secretary Xi Jinping’s expectation for the development of private economy.How to deal with the bond default of private enterprises has attracted more and more attention from the industry and academia.In the face of the major challenge of private enterprise bond default,in-depth analysis of the formation of bond default path,exploring the correct and efficient solution measures,reducing the harm of bond default to private enterprises,can solve the urgent need in the development of private economy.Through case analysis,this thesis selects Zhongrong Xinda Group Co.,LTD.,a private enterprise that defaulted on bonds in 2020,to explore the causes and solutions of bond defaults of private enterprises.This thesis deeply explores the problems existing in Zhongrong Xinda Group after issuing bonds,and finds that there are mainly four aspects that lead to the occurrence of bond defaults: One is the radical diversification strategy of the company,blindly letting capital flow out on a large scale and continuously;Secondly,the financial situation of Zhongrong Xinda Group had fallen into the " trilemma" of making profits,financing and paying debts before the bond default;Thirdly,Zhongrong Xinda Group is deeply affected by the contagion risk of guarantee circle,and the excessive external guarantee scale virtually increases the debt repayment pressure;Fourthly,there are defects in corporate governance,and there is almost no system for risk management and control,causing the company to fall into an embarrassing situation of investment projects that are no profit but loss.In addition,this thesis focuses on the analysis of the positive performance of Zhongrong Xinda Group to resolve the bond default,mainly summarizes as three aspects of measures.Firstly,the government gives financial assistance to Zhongrong Xinda Group,helping enterprises out of the swamp as soon as possible;Secondly,Zhongrong Xinda Group intends to expand working capital by strengthening operation and management,including strengthening production and weak spots;Thirdly,Zhongrong Xinda Group negotiates a satisfactory disposal plan with bond holders to relieve the invisible pressure brought by bond default and restore the company’s credibility in the bond market as much as possible.After in-depth discussion on the causes and solutions of bond default of Zhongrong Xinda Group,this thesis tries to provide reference for private enterprises to prevent and resolve bond default in the process of bond issuance management,putting forward countermeasures and suggestions.In terms of preventing bond default risk,private enterprises should comprehensively consider their own financial status,main business and industry prospects,rationally plan development strategies,truly achieve the goal of profit,and resist default risk with hard power.At the same time,private enterprises should prudently carry out external guarantee,control the amount of guarantee scale,timely detect the possibility of guarantee risk contagion and prevent from the harm of guarantee circle;Private enterprises should also improve the awareness of internal risk control,and establish an effective system to warn financial risk,preventing bond default risk from the root.In terms of resolving the bond default crisis,private enterprises should actively maintain reasonable and effective communication with bond holders,adopting diversified reconciliation methods to improve resolving efficiency;Besides,it should actively respond to national policies,forming a good relationship with the government and other relevant departments,to win the favor and attention of the government,and to bring external financial assistance for resolving the problem.In addition,private enterprises should adhere to the principles of marketization and legalization,and use the force of market’s automatic adjustment to keep the normal operation of the company,while protecting all parties’ interests in a legal and transparent way.This thesis hope to make a meager contribution for the healthy development of Chinese bond market by straightforward providing lessons and warning for private bond issuers,and indirectly inspiring bond holders and regulators to pay attention to the problem of potential risks on the basis of enriching existing research.