Bond Replacement Winds Up: The First Case Of Urban Investment Company Case Slow Release Credit Risk To Be Solved

Since the launch of the first single bond replacement project in March, a number of companies have tried.

Recently, Wafangdian City coastal project development Co., Ltd. (hereinafter referred to as "Wafangdian City development company") announced that the "20 tile 02" bonds subscribed by the company were not subscribed by cash. Instead, they were subscribed to the "17 tile 02" bond as the right to the 1:1. In the view of institutions, the practice is to allow the investors of old coupons to subscribe new coupons, which belong to the scope of bond replacement.

As a city investment company, Wafangdian City development company's bond replacement trend has aroused special concern.

In April 14th, Wafangdian City development company has just issued a $300 million 2020 non-public offering corporate bond (phase 1) (referred to as "20 Tile House 01") listed on the Shanghai Stock Exchange, taking quotations, inquiry and agreement transactions.

In fact, with the support of policies, bond replacement projects have been launched. Since the beginning of March, 2 companies have done the work of bond replacement, which has further enriched the disposal of risk certificates. But at the same time, market worries still exist.

"The main body of debt replacement is the weak qualification body, some of the main body credit risk has been exposed or the open market is difficult to continue financing. Debt replacement only relieves the issuer's immediate pressure on maturity, which may still be a temporary solution. The director of fixed fund of a public security fund of a brokerage company was interviewed.

City Investment Company test water bond replacement

Statistics show that the actual controller of Wafangdian City development company is Wafangdian City Municipal Finance Bureau, and Wafangdian City development company is the main body and main operational entity of Wafangdian City's urban infrastructure construction and land development. The "17 tile house 02" was issued by the Wafangdian City development company in April 2017, with a scale of 400 million yuan and a nominal interest rate of 6.8%, with a period of 3 years.

Wind data show that in addition to the newly issued "20 Tile House 01" and the replacement of "20 tile roofed 02", as of April 14th, Wafangdian City development company also has "17 tile house 03", "16 watts coastal debt" two bonds exist, the current balance of 1 billion 200 million yuan. Among them, the "17 tile house 03" scale is 300 million yuan, and is due to expire on the 25 th of this month.

According to the semi annual report in 2019, the Wafangdian City development company's bonds payable amounted to 1 billion 193 million yuan and the current liabilities due in one year amounted to 1 billion 541 million yuan.

In recent years, the performance of Wafangdian City development company is showing a downward trend. Data show that in the three quarter of 2017, 2018 and 2019, the net profit of Wafangdian City development company was 333 million yuan, 155 million yuan and 97 million 387 thousand and 600 yuan respectively.

Debt replacement is a way of debt management. At present, three debt entities have issued replacement debt in the market, which is also a way to deal with risks. Wafangdian City is the first issuer of debt replacement in the city. If the regulatory authorities and local governments support, the weak qualification cities will have a strong incentive to issue replacement bonds. The aforementioned public fund people said.

In the view of Huachang securities, if the replacement of Wafangdian City city's bonds is successfully completed, there will be more city investment platforms participating in the replacement of existing bonds. On the one hand, it has policy support from regulatory bodies; on the other hand, the negative impact of debt replacement before the occurrence of risk events is smaller than that of debt restructuring after the occurrence of risk events, which is conducive to maintaining the credit image of the platform and local government related units in the capital market.

In fact, before the Wafangdian City development company, Sander engineering and Huachang realized the first single bond replacement between the bank and the exchange market respectively.

"The recent increase in bond replacement is, on the one hand, the recent outbreak of the new crown pneumonia outbreak, which has affected the normal operation of many enterprises. Under the circumstances of insufficient internal funds available and external financing being unable to advance normally, enterprises are faced with greater liquidity pressure, and the uncertainty of bond payment on schedule has increased. On the other hand, bond replacement as a new debt financing tool, although it can not completely avoid default, but as an innovative means of further enriching the way of dealing with the default of marketable bonds, it still has great practical significance. In April 14th, Dagong International said in an interview with the twenty-first Century economic report reporter.

Remain alert to market risks

It is worth noting that although the bond swap is obviously better than the issuer, it relieves the company's liquidity pressure and adjusts the debt maturity, and the innovation way through the bond replacement avoids the traditional bonds borrowing new and old, but for investors, it still needs to be treated in different situations.

"If investors choose to replace, and the rights and interests of debt repayment can be guaranteed on time, then the replacement of bonds is an innovative operation conducive to market diversification; but if investors choose not to replace, and the corresponding rights and interests can not be guaranteed, the replacement of" compulsory renewal class "bonds will seriously damage market confidence and affect the recognition of issuers and regions. " Chen Kaiyang, director general and head of the fixed income fund group, told the twenty-first Century business reporter.

Chen Kaiyang said that under the background of credit stratification, the issuers of unconventional operations tend to be highly mobile enterprises with relatively limited credit quality. Public funds attach great importance to the investigation of assets credit qualification, and the possibility of participating in the replacement of such principal bonds is not high.

"If there are measures to increase credit, it is acceptable, otherwise there will be a suspected breach of contract." Beijing a private equity fund manager believes.

In the interview, Dagong international pointed out that the risks and opportunities of bond replacement coexist. The bond replacement mechanism provides an optional institutional tool for corporate debt management, but the replacement itself can not fundamentally solve the problem of enterprise operation and liabilities. Its uncertainty is mainly reflected in the definition of whether the bond is default, the uncertainty of subsequent repayment of replacement bonds, and the perfection of information disclosure.

Conventional replacement can avoid bond default, and discount substitution may be defined as default bond. The way enterprises choose bond replacement to alleviate the liquidity crisis indicates that the means to solve the financial difficulties in a short time are limited. The accuracy and timeliness of enterprise information disclosure are related to the creditors' assessment of replacement bonds. Only when sufficient information is obtained, can creditors be able to decide whether to accept bond replacement offer. According to Dagong international.

From the overall market situation, credit default risk is still the focus of institutional concern.

"Overall, under the influence of the epidemic, the role of the city's investment bonds in steady growth has become more prominent, and the risk of default has declined, but the risk of default has risen. Subdivided into different industries, under the influence of epidemic situation in China, the operation of film and television media, retail trade, port logistics and other industries has been interrupted. Some enterprises have increased the risk of book goodwill and investment real estate impairment. Under the influence of overseas epidemic, the loss of main order and the risk of asset impairment are relatively high in overseas income and overseas assets. Chen Kaiyang said.

Tian Yejun, a fixed income Research Department of Founder Fubon fund, pointed out that "the spread of the epidemic in the sea has affected the economic downward pressure at home and abroad, weakening the fundamentals of corporate credit, and gradually increasing credit risk. It is expected that the credit pressure brought by the epidemic to some weak qualified enterprises will be gradually reflected in the two quarter. Under the current loose liquidity pattern, the overall credit risk can be controlled, but the trend of differentiation is inevitable. In the environment where credit risk may be gradually fermented, we should pay more attention to corporate refinancing capability and debt structure, and prevent sensitive industries and tail individual risks.

(Editor: Wu Yan Ling)

?