Gambling Yong Coal Bonds: A struggle between creditors and the government
Our reporter/Chen Weishan
Published in the 974th issue of China News Weekly on November 30, 2020
On the afternoon of November 17, Zhengzhou's temperature dropped sharply after the moderate rain.
Although the interest of “20 Yongmei SCP003” exceeding 32 million yuan had been paid the day before, it did not ease the atmosphere in the meeting room on the 17th floor of Henan Energy and Chemical Group Co., Ltd. (hereinafter referred to as “Henan Energy”). The interest payment was regarded by some creditors. To "just show oneself is not to avoid debt."
In fact, among the dozens of creditors present that day, only a few actually held the defaulted "20 Yongmei SCP003", and more held Henan Energy or its subsidiary Yongcheng Coal and Electricity Holding Group Co., Ltd. (hereinafter referred to as " "Yongmei Holdings") bonds that have not yet matured, "seeing that the lead has been ignited, and I don't want to stay in the office anymore, the pressure is too great."
The lead was ignited a week ago.
On November 10, Yongmei Holdings announced that due to the shortage of liquidity, it failed to raise full cash on schedule. “20 Yongmei SCP003” constituted a substantial default. As Henan Energy and Yongmei Holdings all 26.5 billion public debts There is a cross-protection clause. If the principal and interest of "20 Yongmei SCP003" are not repaid in full within 10 working days after the default, the cross-protection clause will be triggered.
"How could it not be nervous, it will explode if it explodes." A creditor who holds the Henan Energy winning ticket due next year said frankly to China News Weekly.
After a one-day wait on November 16, the creditors saw Henan Energy's management again on the 17th, but compared to November 12, the number of creditors present dropped sharply.
A creditor recalled to China News Weekly that at least 40 or 50 creditors were present on the 12th. It was called a "financial institution gathering". The scene was fierce. Some financial institution representatives questioned the Henan Energy staff, "Who owes whom? Money?” It was also at this meeting on the 12th that Henan Energy’s managers promised to “try to collect 1 billion yuan within 10 days to repay the principal”.
After the "20 Yongmei SCP003" materially defaulted, the market immediately questioned: why Yongmei Holdings was still incapable of repaying the principal of 1 billion yuan and still issued the first phase of the 1 billion winning ticket on October 20, especially It was its announcement in early November that it "transferred" the equity of Zhongyuan Bank, a high-quality asset, that raised questions about whether it constituted a debt evasion.
In fact, the capital chain of Henan Energy, the parent company of Yongmei Holdings and the largest state-owned enterprise in Henan Province, has long been very fragile. In the words of an individual from the self-operated department of a brokerage firm, "the problems are all on the surface."
The real game point of the market is whether the government will save it or not?
Fragile funding chain
The time when Yongmei Holdings issued "20 Yongmei SCP003" constituted a substantial default announcement, which was questioned by some creditors as "premeditated".
"The announcement came out at 5 pm on the 10th. If you are still struggling to pay, how could the announcement be so early? It is usually delayed until the evening." A source from the asset management department of a brokerage firm told China News Weekly, " Brilliance is the kind of person who has been lying in the ICU for a long time. The default is sooner or later, but Yongmei Holdings’ default to the outside world feels that it’s suddenly lying down. The series of signals sent before point to the essence and interest of '20 Yongmei SCP003' Can be paid on time."
Just one week before the announcement of the substantial default, on November 3, Yongmei Holdings issued the "20 Yongmei SCP003" redemption announcement. On October 20, Yongmei Holdings also issued 1 billion winning tickets.
"I clearly know that the capital chain may be broken, why do I need to raise funds?" a source from the asset management department of an insurance company questioned.
Inquiring about the prospectus for the mid-term ticket, we can find that as of the end of March 2020, Yongmei Holdings announced that its monetary fund balance was 48.614 billion yuan. This figure rose to 49.978 billion yuan in the middle of this year, but why it could not be repaid 10 100 million yuan bond principal?
A person from Yongmei Holdings’ Funding Section revealed to China News Weekly that as of the end of September, there were still more than 47 billion yuan in monetary funds, but they were mainly restricted funds, such as some loans and bill deposits that could not be used.
Moreover, before the "20 Yongmei SCP003" defaults, Yongmei Holdings will not retain funds in its daily accounts. "The funds will be cleared daily and will be transferred to Henan Energy. We need to apply for the use of funds, and approval at the group level."
Henan Energy Headquarters is located at No. 6 Business Outer Ring Road, Zhengzhou, Henan.
Photographer/Reporter Chen Weishan
“Before 2018, Henan Energy only collected funds from subsidiaries on a regular basis and on-demand. In recent years, due to tight cash flow, the pressure to repay debts is relatively high, so it collects funds daily.” A Henan Energy insider told reporters that debt From the group level "all borrowing and all repaying", "From the issuance of bonds, it can be seen that Yongmei must cooperate unconditionally."
"Yongmei Holdings is basically initiated by Henan Energy. After completing the process, tell them that they must issue this debt." A person who was the lead underwriter of the Yongmei Holdings bonds told reporters that Yongmei Holdings has funds being collected. After arriving in Henan Energy, it was loaned to other subsidiaries.
A manager of Henan Energy also admitted that, in addition to restricted funds, part of Yongmei Holdings' funds were borrowed by the group.
This can also explain why many creditors gathered in Henan Energy after the "20 Yongmei SCP003" thunderstorm, Yongmei Holdings really had no money in its account, and Henan Energy only had 100 million yuan in cash.
In fact, Yongmei Holdings’ “lying down” was not sudden. The aforementioned insurance company’s asset management department revealed that the risk control had issued an early warning. The company had already decided to sell “20 Yongmei SCP003” in the secondary market, but it considered a longer period. Short, finally decided to continue holding.
"Since March this year, the company has no longer added bonds of weak 3A state-owned enterprises like Henan Energy and Yongmei Holdings."
Before the bond exploded, the risks had already appeared at the bank and "non-standard" business levels at least in September this year.
Judging from the remaining interest-bearing liabilities of Henan Energy, bank loans account for about 140 billion yuan, the balance of bonds is about 50 billion yuan, and there are more than 50 billion yuan of "non-standard" business.
"In September, I almost didn't pay back the money. At that time, Hemei said that he had money, but the senior executives of Henan Energy Finance Company told me,'Their money is all in the financial company's account, and we ran out of it.' October repayment At that time, we directly used 10 million yuan as a deposit to fill in the holes.” A person from a financial leasing company that provided loans to Henan Energy’s Hemei Company told reporters, “The extension plan has actually been negotiated, and the agreement is waiting to be signed. Yongmei SCP003's breach of contract has brought about variables."
The aforementioned Henan Energy insider admitted frankly on November 19 that although only "20 Yongmei SCP003" has experienced substantial defaults, banks and "non-standard" businesses have not yet breached their contracts, but some of the principal and interest have not been paid due and they have been communicating.
"After the bank's debt committee was opened on September 20, the banks have basically agreed on the adjustment of interest settlement methods. Some interest is settled half a year or once a year, and some profits are settled with the principal. Financial leasing companies are communicating with each other. "
Behind the risk of Henan Energy's capital chain rupture is debt repayment pressure.
Since the beginning of this year, Henan Energy has repaid a net 14.3 billion yuan. From the perspective of bonds alone, although Henan Energy has no bonds due during the year, Yongmei Holdings’ bonds of 3 billion yuan due in November have all defaulted, and another 3 billion yuan in December. Yuan bonds mature.
However, Henan Energy's financing channels are constantly narrowing.
According to "China News Weekly", in the first half of this year, banks have added new credits to Henan Energy, but the amount of new credits in the third quarter has been minimal.
A brokerage person revealed, “We almost helped Yongmei to issue a bond in October, and everything was ready, but in the end they didn’t find the money.” In fact, since the second half of this year, the bonds issued by Henan Energy are basically all It was purchased by financial institutions in Henan Province. "The local financial institutions have been filled up and basically reached the upper limit."
"As long as the state-owned enterprises in Henan Province you can think of have lent us money, the questioned Zhongyuan Bank equity is actually not'free' transfer." An insider of Henan Energy said.
Prior to this, Yongmei Holdings announced on November 2 that it would "transfer" its equity interests in Zhongyuan Bank to Henan Machinery and Equipment Investment Group and Henan Investment Group respectively.
After “20 Yongmei SCP003” breached the contract, the “free transfer” was questioned as the removal of high-quality assets with good liquidity before the breach.
However, the aforementioned insider revealed to reporters that “the reason why the equity was transferred to these two companies was because of the urgent need for temporary funds. Henan Energy borrowed more than 2 billion yuan from the two companies and promised to transfer the equity to they."
In the case that financing channels have been basically exhausted, Henan Energy has repaid by squeezing wages.
“The group level has owed wages for 5 months, and front-line workers still owe two months. Some employees’ social security may only be paid until May of this year.” The aforementioned Henan Energy insider revealed to reporters that some subsidiaries’ employees’ previous wage arrears were compared. Many people can only do part-time jobs outside. Employees who started early can find some temporary jobs, and some employees can't even find such jobs.
When communicating with some creditors on November 19, the company’s management bluntly stated that the monthly salary cost is about 800 million yuan. “The arrears of wages are to protect bonds and maintain a good image in the market.”
According to the aforementioned insider, Henan Energy even used safety production funds in the early stage to repay debts. "This capital is generally not allowed to be used, but there is really no way, and it has been reported to the province. From production and operation, there is no money left. Up."
Was dragged down by the chemical industry?
Why did the largest state-owned enterprise in Henan Province, with 180,000 employees, come to this step?
"Compared with last year, the average price of coal per ton from January to October dropped by more than 30 yuan." A Henan Energy insider said when talking about the price of coal produced by Yongmei, the decline was not small. "Coal prices It has been picking up recently, but the price was not high some time ago."
In addition to being affected by the entire coal market, a person close to the Henan SASAC analyzed China News Weekly that the free expressway in China had also brought a chain impact on Henan coal companies. It will increase a part of the cost, but after the freeway is free, they start to use road transportation, and the transportation cost has dropped significantly. In addition, it is open-pit mining, and the input cost is small. Henan coal enterprises mostly mine in mines, so the price advantage is no longer. "
Nevertheless, Yongmei Holdings is still considered to be the most high-quality asset of Henan Energy.
"Henan Energy is just a shell. It only has shares in some subsidiaries under its name. Even their office buildings are under the names of subsidiaries and have been mortgaged." An asset management company person told reporters, "We have conducted research many times. Henan Energy, their core value is Yongmei Holdings."
Yongcheng is located at the border of the four provinces, and the coal produced is relatively close to Baosteel and Wuhan Iron and Steel. “Yongcheng’s coal is not worried about selling at all. At that time, we did a non-standard business to investigate in the mining area, and it was spotless. Pull coal out of the land.” The aforementioned asset management company said.
Henan Energy's coal assets mainly include Yongmei Coal, Crane Coal, and Coking Coal.
“Yong Coal is the largest in scale and it was mined late. It belongs to anthracite coal. The quality of the coal is better. It is comparable to Shanxi coal and can be sold at a relatively high price. Although coking coal is also anthracite, it was mined earlier in the early 20th century. Many mines have been mined, and many mines have ceased production, and the coal quality of Crane Coal is not as good as Yong Coal and Coking Coal." A person familiar with Henan coal enterprises told reporters, "The coal market has been relatively good in the past two years, so in fact, the benefits of coal enterprises It's all ok."
This is true from the financial data. From 2017 to 2019, Yongmei Holdings' coal production and sales continued to grow, and coal business revenue increased from 18.911 billion yuan to 22.988 billion yuan.
“The operating conditions of Yongmei Coal have been in fact very good,” said a Henan Energy management person. “Yongmei is currently producing at full capacity, and most of the remittances are cash remittances, because we requested the coal sales to collect money at the beginning of the year. It mainly uses cash exchange to pay off debts."
According to him, the repayment is not every day, and Yongmei's own normal production and operation still needs some funds. "Under normal circumstances, the average daily net capital inflow may be more than 10 million yuan, and Yongmei's cash flow is still relatively large. "And a brokerage person told reporters that Yongmei is a golden chicken for Henan Energy.
In fact, it is the chemical sector that really brought down Henan Energy and Yongmei Holdings.
This can also be seen in the financial statements of Yongmei Holdings. In non-coal businesses such as trading, chemicals, and non-ferrous metals, the revenue of the chemical business decreased by 29% year-on-year last year, and the gross profit margin dropped sharply from 18.94% in 2018 to 1%. , And the gross profit margin of Henan Energy and Chemical Business even turned negative in 2019.
"It turns out that when the chemical sector was not divested, the annual net profit was several hundred million yuan. After the chemical sector is divested, the capital flow should be enlarged." The aforementioned person from the Yongmei Holding Fund Department told reporters.
On November 2, Yongmei Holdings has divested its chemical sector as a whole.
"Except for central enterprises, Henan Energy may be the country's largest coal chemical company. The chemical sector has huge assets, but the low oil prices in recent years have had a huge impact on Henan's energy and chemical business. In addition, due to the impact of this year's epidemic, exports have almost stagnated." The aforementioned is close to Henan Province. A person from the State-owned Assets Supervision and Administration Commission explained, “Many chemical products are raw materials needed by the construction industry, such as paint, PVC pipes, etc., but the entire domestic market is currently in a downturn, and Henan Energy itself is also facing payment defaults. Now a special reminder has been established. The debt team went to various places to collect debts, and the funds for about 70 projects were not received."
Henan Energy’s chemical sector continues to suffer losses. A group insider told China News Weekly that the chemical sector’s annual net loss is nearly 4 billion yuan.
"In fact, except for the chemical business that is not profitable, other businesses are profitable. It is just a matter of making more and less." Affected by this, Henan Energy's net profit attributable to its parent since 2017 has been negative, and its loss last year exceeded 20. 100 million yuan, the loss in the first quarter of this year alone exceeded 1 billion yuan.
The managers of Henan Energy also admitted that some of the funds collected by Yongmei Holdings in Henan Energy were lent to the group's severely loss-making chemical sector.
However, even considering the good cash flow of Yongmei Coal, it will be difficult to cover the bonds that will mature in a period of time in the future. From November 2020 to April 2021, in half a year, 13 billion yuan of bonds will mature or return. Sale.
The aforementioned Henan Energy insider said, "We still need to rely on external forces, and it is definitely not possible to rely solely on our own cash flow."
And a person from the self-operated department of a brokerage firm said bluntly, “If you really say that it is not bad for the company, the problem is all on the surface, it is just a question of when the government will not save it, because the front has been saving it.”
Save or not?
After the "20 Yongmei SCP003" constituted a substantial default on November 10, before the cross-protection clauses of many remaining bonds were formally triggered, within 10 working days, the creditors thought of "the time left for Henan Energy is running out" several times. , But it was unable to wait for a clear signal of government assistance.
"They were really difficult in September, but in October the government had a series of rescue and capital injection actions." A source from the asset management department of a securities firm told China News Weekly.
On October 5, the Party Committee of the SASAC of the Henan Provincial Government issued a report on Henan’s energy debt risk resolution and reform and relief. This "red head document" was regarded by many market participants as a series of support for Henan released by the government in October. The beginning of energy policy signals.
"At that time, the market had already heard negative news, but after all, the government came forward to make a statement. The company also felt confident when it came to enterprise research at that time." The aforementioned brokerage asset management department said.
The report mentioned that “with the concerted efforts of all parties, the full-scale outbreak of Henan’s energy crisis has been contained, but the current situation is still extremely severe”. It has a clear prediction of the rigid funding gap for Henan Energy by the end of 2020: October As of December, a total of 22.9 billion yuan of bonds, non-renewable non-bank borrowings, interest and wages have matured one after another. 14.5 billion yuan has been resolved and there are solutions, and there is still a rigid funding gap of nearly 8 billion yuan.
Subsequently, at the Henan Energy Reform and Difficulty Mobilization Conference on October 16, Chairman Liu Yinzhi disclosed that the provincial government decided to increase the capital of Henan Energy by 15 billion yuan in cash, assets and other forms. It has now completed the capital increase of 6 billion yuan. The remaining capital increase will be in place one after another as planned.
At the end of October and early November, that is, before the "20 Yongmei SCP003" materially defaulted, the leaders of Henan Energy also led a team to a road show of some financial institutions in Beijing and Shanghai.
A person from a financial institution who participated in the Henan Energy Roadshow in early November recalled to China News Weekly, “At that time, the leaders of the other party directly showed us the'red-head document' with a capital injection of 15 billion yuan from the provincial government, expressing hope that we would support them. The bonds issued have released a series of good news to the market."
Some people close to the regulation analyzed to reporters that most of the participants in the bond market are professional investors, and it is impossible to misjudge the fundamentals of the company. Yongmei’s “stepping on thunder” is more because of its “belief” in state-owned enterprises.
According to the aforementioned person close to the Henan SASAC, “The 15 billion yuan capital increase includes a part of the equity of other companies, which will be pledged for financing after the equity is allocated to Henan Energy. In addition, there is indeed a part of cash, including land resource prices, bonuses and subsidies. Funds, etc. After the increase in capital is to boost market confidence, financial institutions will continue to lend and issue bonds.” According to the reporter, the scale of cash and assets are 9 billion yuan and 6 billion yuan, respectively.
Some people close to Henan Energy said that the company was relatively confident in repaying the "20 Yongmei SCP003".
When communicating with some creditors on November 12, Henan Energy management also stated that in order to gather the principal and interest of "20 Yongmei SCP003", there were four plans at that time. One was to issue bonds; the other was to sell equity; and the third was government coordination. A sum of funds; the fourth is to pledge financing after transfer into equity.
But in the end, none of the four plans were put in place.
A person from the Henan Energy Finance Department introduced to reporters, “Before this breach of contract, the equity of Pingmei Shenma had not been officially transferred to Henan Energy, but the announcement had been issued at that time, and we have been using this equity to find a bank. Pledge, I hope that this matter can be implemented before the 10th, but ultimately failed to land."
To be sure, when the "20 Yongmei SCP003" breached the contract, the provincial government did not plan to inject all the cash into Henan Energy. For example, the land resource price is planned to be 2.15 billion yuan on October 15 and then in November. 800 million yuan was received, and the 800 million yuan was not yet in place when the default occurred.
"It's not just a few billion dollars that are on the accounts of the Department of Natural Resources, but they can only be credited one after another." The aforementioned financial department person explained.
After the breach of contract by "20 Yongmei SCP003", the Henan Provincial Government also remained "silent" for a while.
This has caused some creditors to question the government’s previous support for Henan Energy’s change. “When you can’t borrow money, talk about'faith', and talk about market-based disposal after breach of contract.”
What really made the creditors feel the change in the “wind direction” was the communication meeting held between Henan Energy’s management and some creditors on November 17th. Almost at the same time that the afternoon meeting was held that day, the holders of “20 Yongmei SCP003” received Notice to the lead underwriter to communicate about the extension.
When asked why the contract extension was negotiated with financial institutions only a week after the default, a manager of Henan Energy said, "In the early stage, we were also trying to obtain funds, but the situation has changed." A representative of financial institutions asked, "The solution There are only two, one is to get a sum of money from the Henan Provincial Government to redeem the default bonds, and the other is to communicate with investors to extend the period. Can the changes that have occurred be understood as a tilt towards the latter?" It’s not quite right, they are all actively trying to solve it, "but the focus may be slightly different."
In the communication during the "20 Yongmei SCP003" exhibition, whether it can win more support from the government has become the key to the game.
Someone who participated in the "20 Yongmei SCP003" holders' pre-communication meeting on the 19th revealed that the vast majority of the 14 financial institutions opposed the "270-day renewal and constant coupon rate" extension plan and continued to put pressure on them collectively.
"Without sincerity, if you pass this plan, you will deceive yourself."
At that time, holders generally requested an increase in the ratio of principal redemption and additional guarantees.
"It is necessary to join the guarantees of some 3A state-owned enterprises in the province that are deeply tied to the government. If there is no such guarantee, there is no way to default in 270 days." A creditor told reporters, "If we still can't get government support in the future , At least drag a state-owned enterprise in by guaranteeing it, which is plain to say."
Since then, the amount of principal redemption has increased from zero to 5% and 30%, but it is still difficult to satisfy creditors.
On November 19, there were only three working days before the cross-protection clause was triggered. An insider of Henan Energy said, "The most troublesome thing is that the government's attitude is still unclear."
It was not until the afternoon of November 22 that there was a turnaround. The lead underwriter urgently contacted the holders of “20 Yongmei SCP003” and stated that the advance payment ratio of the principal was increased to 50%, and the remaining principal was extended for 270 days, and the current bond default was exempted .
At the holders' meeting held on the 23rd, the Henan SASAC stated that the previous support plan for Henan Energy should continue to advance.
On the 24th, this plan was approved by the holders unanimously.
Some holders believe that “putting out such a plan means that the province must have expressed its position, but the actual harm has been caused.”
Yongmei default shock wave
The most direct impact of the "20 Yongmei SCP003" default is the intensive cancellation or postponement of the issuance of urban investment and energy bonds.
Within a week from November 10, at least 28 bonds have been cancelled or postponed, with a scale of 22.6 billion yuan. Among them, energy bonds are not a few, such as "20 Yangmei 02", "20 Shanmei CP005", and "20. Jinneng MTN019" "20 Yankuang MTN004" and so on.
There are also three Henan Provincial Urban Investment and State-owned Enterprise Bonds cancelled, namely "20 Shangqiu 03" of Shangqiu Ancient City Protection and Development Company, "20 Kaifeng Urban Transport MTN001" of Kaifeng City Operation Investment Group, and Henan Transportation Development Group Co., Ltd.'s "20 Yujiaoyun MTN007", the issuance scale of three bonds reached 2.6 billion yuan.
These three lead underwriters who have cancelled bond issuance told reporters that the company took the initiative to cancel the bond issuance, "because it is too sensitive now, and the company itself is afraid of thunder."
A person from the asset management department of a brokerage firm revealed to reporters that after the "20 Yongmei SCP003" defaulted, there are still Henan bond projects inquiring, "The work is always to be done, but the asset management and self-operation of the brokerage companies are basically temporarily , State-owned enterprise bonds are no longer invested in a'one size fits all' approach."
"The key is whether there are still conditions to develop business in Henan? Now even Yujiaoyun does not issue bonds. Their financing costs were relatively low. The coupon rate of a single 3-year mid-term note issued this year is only 2.7%." Regarding the question of whether Henan’s corporate bond business will be launched in the near future, a banker told reporters, “We just sent out the announcement of Henan companies’ bond issuance, and immediately a bunch of peers called and said, “Return to Henan companies at this time. Issuing debt?' After that, we took the initiative to withdraw."
After the "20 Yongmei SCP003" breached the contract, many Yongmei Holdings and Henan Nenghua bond investors wrote to the China Interbank Market Dealers Association, questioning their suspicion of evading debts, and "requesting the suspension of the registration of state-owned enterprises in Henan Province And the issuance application, carefully prevent and control similar risk events from happening again."
A person close to the financial regulatory authority of Henan Province admitted to China News Weekly that the impact of Yongmei’s default on Henan’s financial environment is obvious.
In fact, in the aforementioned report issued by the Party Committee of the SASAC of the Henan Provincial Government on October 5, it was mentioned that “Once the debt crisis breaks out, it will trigger a chain reaction, leading to the rapid deterioration of the financial environment in our province and even triggering regional financial risks. "
The impact of Yongmei’s default has spilled over to other provinces. Creditors who hold a large number of Shanxi coal company bonds told reporters, “Shanxi coal companies directly wrote to us saying, “We will definitely not lie down like Yongmei.”
The Shanxi government even called the market twice within a week. First, on November 14th, Shanxi State-owned Capital Operation Co., Ltd. issued a “Letter to Creditors of Shanxi Province-owned Enterprises” stating that it had achieved an early warning 15 days in advance. "Ensure that there will be no default on the maturing bonds."
A few days later, on November 18, at the Shanxi Provincial Government’s special meeting of the heads of provincial state-owned enterprises and financial institutions, Vice Governor Wang Yixin directly “proclaimed” to financial institutions that financial institutions should have more confidence in Shanxi and said In today's context, there is no reason for provincial state-owned enterprises to breach contracts.
The Shanxi government successively issued the statement that provincial state-owned enterprises are almost "rigid redemption", which made many bondholders of Henan Energy and Yongmei Holdings sigh with emotion and suggested that the Henan government follow suit.
However, some market participants believe that such a statement is more like a bad attitude, but it will cause investors to panic.
During the 10-working day grace period after Yongmei’s default, creditors’ expectations for government support have thrown the market the problem of how “rigid redemption” should be broken, and this has forced the creditors to “evade debts” against Yongmei Holdings. Doubts, whether this incident of default is a suitable sample for discussing "rigid payment" or "debt evasion" is still in doubt.
Hue, chief economist of Founder Securities, said that on the one hand, there are market views that malicious evasion of debts requires high-level coordination; on the other hand, credit bonds are risky and investors are responsible for their investment behavior.
"The Yongmei incident itself is not a complete market behavior. Therefore, investors are not fully borne by market risks. The follow-up may require a higher level of coordination and proper handling."
On November 21, the Financial Stability and Development Committee of the State Council stated that it would severely punish all kinds of “debt evasion” and protect the legitimate rights and interests of investors.
However, cracking down on "escape debt" does not mean returning to rigid redemption. As the fixed income analyst of CITIC Securities has clearly stated, it is necessary to gradually break rigid redemption, but it is definitely not the issuer's "borrowing the donkey". The excuses for malicious evasion of debts, such as transferring assets and embezzling funds, are by no means a shield for the convenience of intermediaries.
Following the launch of self-discipline investigations on Yongmei Holdings and Haitong Securities, the NAFMII initiated investigations on Industrial Bank, Everbright Bank, Zhongyuan Bank, China Chengxin International Credit Rating Co., Ltd., and Sigma Certified Public Accountants on November 19. Special general partnership) and other intermediary institutions’ self-discipline investigations.
China News Weekly, Issue 44, 2020
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