Sunac China Holdings Limited Debt Default Case Study

The real estate industry is the "grey rhinoceros" with the biggest financial risk at present stage.Its potential debt risk seriously affects the financial security and social stability.In 2022,the real estate industry will become the industry with the largest amount and number of debt defaults.An in-depth study of its debt defaults is of great significance to enterprise operation and national economic stability.Based on the above background,this paper takes Sunac China’s debt default event in May 2022 as a case to explore the causes of its default.This paper firstly combs and analyzes the current situation of debt default in the real estate industry to pave the way for the following case analysis;Secondly,the debt event of this case is reviewed.Finally,starting from the macro environment,the company’s internal management and the company’s financial situation,using the combination of case analysis and comparative study to analyze the causes of the company’s debt default,and draw a series of valuable conclusions on the causes of its debt default.The main external reasons are:the financing difficulties caused by the policy regulation of the real estate industry and the tightening of financial policies,combined with the impact of the novel coronavirus epidemic,led to Sunac’s debt default.Internal reasons include:from the perspective of the company’s internal management,it reflects the aggressive expansion strategy,blind investment and so on.From the Angle of asset-liability ratio after excluding the advance payment,it reflects the unreasonable capital structure,the growth of operating income covers up the blocked sales performance.From the perspective of net debt ratio,it reflects the heavy burden of interest-bearing debt,high financing cost and insufficient equity financing.From the perspective of cash short debt ratio,it reflects that cash is difficult to cover short-term debt,debt maturity structure imbalance,operating cash flow is unhealthy and so on.Based on the analysis of the above reasons for default,the following suggestions are put forward for real estate enterprises:pay close attention to macro policies,avoid blind and disorderly expansion,reduce financing and make good planning and reasonable arrangement of debt structure.