20 Yongmei scp003 constitutes substantial breach of contract follow up: suspected market manipulation

category:Finance
 20 Yongmei scp003 constitutes substantial breach of contract follow up: suspected market manipulation


On November 10, 2020, Yongmei holdings announced that due to the shortage of working capital, 20 Yongmei scp003 failed to pay the principal and interest in full on schedule, which constituted a substantial breach of contract, with a total amount of RMB 1.032 billion. It is worth mentioning that 20 Yongmei scp003 has actually breached the contract, which has also led to a series of cross default, such as 20 Yongmei mtn006 issued on October 20. As a result, on November 12, the association of dealers expressed concern about the rapid substantial breach of contract by Yongmei holdings following the issuance of 20 Yongmei mtn006 on October 20, 2020.

In fact, the existing debt financing instruments issued by Yongmei holdings in the association of dealers have investor cross protection clauses. Wind data shows that after the 20 Yongmei scp003 material default, 20 bonds including 20 Yongmei mtn006 triggered cross default protection clauses, involving a total amount of 19.710 billion yuan.

Association: no self financing of issuers

Coincidentally, on November 18, the association of dealers also issued the notice on matters related to further strengthening the regulation of issuing business of debt financing instruments (hereinafter referred to as the notice), echoing the self-discipline investigation of Haitong Securities and its related subsidiaries.

According to the association of dealers, it has recently found that some market institutions have problems in the issuance of bond financing instruments, such as inadequate implementation of rules, imperfect internal control mechanism, and irregular business operation, which has exposed the phenomenon of paying more attention to contracting than issuing and selling and attaching importance to business development and neglecting compliance management under the background of rapid market development.

The circular emphasizes that it is strictly prohibited for issuers to self financing and strengthen market behavior norms. Specifically, it further emphasizes that issuers are prohibited from directly or indirectly subscribing for debt financing instruments issued by themselves, and cracking down on structured issuance violations. The lead underwriters, underwriters and investors shall not deliberately assist the issuers to engage in the above-mentioned behaviors. Each market entity can report or complain to the association if it finds that the institutions and personnel related to the issuance of debt financing instruments violate the self-discipline rules of the association. The default of Yongmei is very bad, and a large number of investors are not satisfied with it. If the violation is found out, the association is bound to give punishment. Once the punishment is introduced, it is even self-discipline punishment, which is a little lighter than administrative punishment, but it is also official evidence, and investors can go to the court to sue. There is an industry analysis said. Similarly, Xu Feng, director of Shanghai Jiucheng law firm, also believes: if there are violations, it is likely that the CSRC will investigate and impose administrative penalties. Of course, even if only the conclusion of the self-discipline punishment of the exchange or the association of dealers, investors may claim compensation. The specific responsibility and claim conditions can only be judged according to the specific contents of assistance and manipulation. Source: Daily Economic News Author: Chen Chen, editor in charge: Wang Xiaowu_ NF

The circular emphasizes that it is strictly prohibited for issuers to self financing and strengthen market behavior norms. Specifically, it further emphasizes that issuers are prohibited from directly or indirectly subscribing for debt financing instruments issued by themselves, and cracking down on structured issuance violations. The lead underwriters, underwriters and investors shall not deliberately assist the issuers to engage in the above-mentioned behaviors. Each market entity can report or complain to the association if it finds that the institutions and personnel related to the issuance of debt financing instruments violate the self-discipline rules of the association.

The default of Yongmei is very bad, and a large number of investors are not satisfied with it. If the violation is found out, the association is bound to give punishment. Once the punishment is introduced, it is even self-discipline punishment, which is a little lighter than administrative punishment, but it is also official evidence, and investors can go to the court to sue. There is an industry analysis said.

Similarly, Xu Feng, director of Shanghai Jiucheng law firm, also believes: if there are violations, it is likely that the CSRC will investigate and impose administrative penalties. Of course, even if only the conclusion of the self-discipline punishment of the exchange or the association of dealers, investors may claim compensation. The specific responsibility and claim conditions can only be judged according to the specific contents of assistance and manipulation.