Case Study On Bond Default Of Zhongrong Xinda Group

Bonds,as an important capital market tool,occupy a large proportion in the scale of financing in our country,and play an important role in promoting the proportion of direct financing and improving the efficiency of fund allocation.With the expansion of bond market,the diversification of bond varieties and the increasing number of investors,the risk of bond default is accumulating and emerging.The material default event of "11 super bond" occurred in March 2014,indicating that the rigid payment convention of China’s bond market has been broken,and then the bond default presents a regular trend of development.By December 2022,a total of 779 bonds had defaulted in China’s bond market,involving 247 entities,of which 186 were private enterprises,accounting for 75.30 percent of the total.The total amount of defaults in the bond market reached623.671 billion yuan,among which the amount of defaults by private enterprises reached 402.639 billion yuan,accounting for 64.56% of the total.Both in terms of the number of default subjects and the amount of default,private enterprises are the "disaster areas" of default.As an important participant in our socialist market economy,the private enterprise is an important foundation and new force for promoting our economic development,it is obviously affecting our macro economy’s movement,how to prevent the private enterprise bond default risk and promote the long-term healthy development of our bond market is an important issue worth paying attention to in our economic and social development.This paper takes the bond default event of Zhongrong Xinda Group Co.,Ltd.as a case study.Zhongrong Xinda Group has 4 bonds defaulted for 9 times from January 2020 to December 2022,with the default amount as high as 4.613 billion yuan,which caused a great response in China’s bond market.In addition,Zhongrong Xinda Group has the common problems of private enterprises that have defaulted on bonds and has a high credit rating before default,so it is representative to take it as the research object.This paper firstly analyses the current situation of the bond market default from the development trend of the bond market default scale,the bond default type distribution,the bond default rating distribution and so on,in order to prepare the case analysis below.Secondly,it introduces the basic situation,main business and bond issuance of Zhongrong Xinda Group and reviews its bond default events.Thirdly,this paper uses a combination of qualitative analysis and quantitative analysis to analyze the reasons for bond default of Zhongrong Xinda Group from both external and internal perspectives,and uses Z-Score model to make a quantitative analysis of the default risk of Zhongrong Xinda Group.It is found that the external factors of the bond default event of Zhongrong Xinda Group include the slowdown of macroeconomic growth,the decline of industry prosperity and the lag of credit rating.Internal factors include loopholes in internal governance,failure of aggressive expansion strategy,unreasonable debt maturity structure,poor earnings stability,blocked refinancing channels and large scale of restricted assets.Finally,based on the analysis of the case,this paper provides the corresponding enlightenment for bond issuers,credit rating agencies and investors.Issuers should improve their internal governance capabilities,prudently formulate investment strategies and strengthen their debt risk management capabilities.Rating agencies should strengthen self-discipline and supervision of the industry,strengthen independence and transparency,and improve the rating warning ability.Investors should improve their ability to identify risks and strengthen their awareness of post-investment tracking.