How to solve the problem of default risk of private enterprise debt

 How to solve the problem of default risk of private enterprise debt

As of October 31, wind data shows that 141 credit bond defaults have occurred since 2019, which is higher than the annual level over the years, with a total default amount of 108.803 billion yuan.

And some bond issuers cashing problems are still far from being clearly presented in this data.

The 21st century economic reporter understands that in the past due events of bond payment, such as 16 Yihua 01 and 16 Tianguang 01, the issuer, through continuous communication with the bondholders, persuades them to give a certain grace period or give up the right to sell back, in order to avoid the narrow sense of confirmation of breach of contract, leading to the further aggravation of their liquidity dilemma; and in order to save the liquidity crisis of issuers Therefore, there are some cases where the issuers extension claims are supported by the majority of the holders.

At the same time, there is also the phenomenon that individual holders insist on selling back and refuse to provide grace period for the issuer, which to a certain extent induces the issuers substantial breach of contract, and brings greater difficulty to its subsequent rescue and restructuring.

Nail households phenomenon

21st century economic news reporter understands that this is related to the failure of different bondholders to reach an agreement on whether to withdraw the sale back to provide substantial credit grace period for Tianguang Zhongmao.

However, some institutions and small and medium-sized investors still refuse to withdraw the resale and are regarded as nail households in the event.

In fact, the phenomenon of nail households has been widespread in the current overdue events of bond payment, and the reasons are not the same.

For example, some nail holders refuse to withdraw the resale to provide extension for issuers, in part because some small and medium-sized bond investors have a fluke mentality that hopes to enjoy differential treatment.

Some investors may not hold a large amount of bonds, and they think that a large company like the issuer may have the same amount of funds, so they insist on not selling back, so as to make it easier for them to be bagged. But most of the time, the funds that issuers can pay at a certain point are very limited. They can only pay interest but not the principal, said a bondholder at a large securities firm in Beijing

Of course, there are also some small and medium-sized holders who dont have high trust in the issuer. They are speculating on junk bonds and are worried about the issuers evasion of junk bonds, so they insist on selling back. A professional involved in junk bond investment said.

It is worth mentioning that some holders have become nail households passively because of the small scale of debt holding. The reporter learned that in the 16 days of guang01 event of overdue redemption, some small and medium-sized holders who have applied for resale are difficult to get any contact and communication with the issuer and bond manager.

Inefficient institutions

There are also many institutional investors who play the role of nail in the door in the divergence of extension of some bond default events, and the real reason is more complicated.

For example, according to the investigation of 21st century economic news reporter, in the process of overdue payment of a private enterprise debt that has finally realized off-site payment, there are two fund product holders who insist on resale.

At that time, the issuer did encounter liquidity difficulties and wanted to extend the period. However, the two product holders insisted on selling back and refused to extend the period, because they didnt make the decision to invest in the debt at the beginning, so there was no need to add in this matter, because if the issuer gave up selling back and continued to default, it meant that they had to bear more responsibilities; on the contrary, if it insisted on selling back, it would also default Its the predecessors problem. A person close to the issuer said.

Due to the change of fund managers and other behaviors of product customers, the rights and responsibilities of their investment behaviors are in opposition, which leads to the extension voting of the default of private corporate bonds. The person familiar with the matter said frankly.

At the same time, due to internal risk control requirements and other reasons, some institutional holders are difficult to make quick decisions such as withdrawal of resale and credit extension.

For many institutions, the total issuance scale of credit bonds is not large, and the institutions hold fewer parts, so they often have their own risk control process. Its just like some banks know that the lending enterprises will die and still lend, because the institutional cost of one thing one discussion is too high under the fixed risk control mechanism of the organizational machinery, said a joint-stock banker

In such a short time window, it is difficult for some institutional holders, especially state-owned assets institutions, to form a decision to withdraw the application for resale. Because the whole process is very long and no one is willing to take responsibility, there will definitely be a tragedy in the end, said the head of a bond private equity firm

In addition, there are also some private product users with high leverage. Once they give up selling back, they will face the dilemma of exposure, so there is no space for issuers to have more opportunities.

Some product users themselves take credit debt plus leverage. After the industry stratification in June this year, it is very difficult for product users + credit debt to borrow money. Many product users have a difficult life. If the money due for a product is to repay a debt due from the same industry, there is absolutely no reason for him to allow the issuer to extend the term. Respondents pointed out.

Source: responsible editor of 21st century economic report: Chen Hequn, nb12679