The company's excessive issuance of bonds should be treated from the source

Some insolvent enterprises are still obsessed with excessive bond issuance, and their financing purposes are not their own development, and they need to rely on financing to "tear down the east wall and make up the west wall" to maintain. If similar enterprises issue bonds in large quantities, they should be over-issued for financing. The harm in over-issuing bonds and financing is obvious. To reduce the harm caused by excessive bond issuance, it is necessary to deal with it from the source of bond issuance.

According to the latest statistics of Zhongtai Securities, as of the end of November, more than 300 corporate bond projects have been terminated this year, involving an amount of more than 500 billion yuan. Among them, the number of cases of delays or cancellations of bond issuance in infrastructure, scenic spots, consumer finance and other industries has increased significantly.

Some industries or enterprises have issued bonds "Caton", or postponed or cancelled bond issuance, which has the influence of the development boom of the external industry, and there are also factors such as the strict control of cases of excessive bond financing.

The so-called excessive bond financing is generally those non-growth enterprises such as consecutive years of losses, deceleration in scale expansion, and slowdown in revenue growth, and the asset-liability ratio is higher than a certain value, or the net cash flow of operating cash and net cash flow of investment cannot cover the principal and interest of financing, indicating that the operating burden of relevant enterprises is too heavy and needs to rely on financing to "tear down the east wall and make up for the west wall" to maintain. If similar enterprises issue bonds in large quantities, they should be over-issued for financing.

In reality, some insolvent companies are still obsessed with over-issuing bonds, and their financing purposes are not their own development, and the harm is obvious. On the one hand, once an over-issued enterprise defaults on its debts, it may trigger a chain reaction of upstream and downstream enterprises, putting pressure on the non-performing loan ratio of commercial banks. On the other hand, from the perspective of maintaining financial security, excessive bond issuance will invest valuable direct financing in inefficient and highly leveraged areas, which will bring about a waste of financial resources, which is not conducive to the stability of the financial market, and may also have a certain adverse impact on the healthy development of the real economy.

To reduce the harm caused by excessive bond issuance, it is necessary to deal with it from the source of bond issuance. For bond underwriting institutions, it is necessary to actively guide intermediaries to appropriately bear the disciplinary risks and joint and several liabilities for failure to fulfill their responsibilities in accordance with the principle of investor protection. Intermediaries issuing various types of bonds should conscientiously perform their due diligence duties, exhaustively and truthfully disclose data such as enterprise operations and liabilities, carefully and objectively rate bonds, and use their professional judgment to recommend appropriate financing amounts and methods to issuers.

From the debtor's perspective, avoid moral hazard and soft budget constraints. For enterprises that cannot repay their debts, the relevant parties must maintain a high degree of attention, so that those issuers who over-finance are duly punished, and individuals must be investigated for improper transfer of property.

For bond issuers, it is necessary to strengthen their capital management capabilities and risk control, but also curb their disorderly expansion, truthfully do a good job in information disclosure obligations, and urge them to borrow scientifically and reasonably.

For the regulatory authorities, it is necessary to strengthen the supervision of information disclosure and crack down on violations of laws and regulations in the process of bond issuance. In terms of macro aggregates, in accordance with the principle of macro prudence, control excessive financing in a small number of industries, detect macro aggregate debt indicators, give early warnings from the aspect of regulatory policies, and maintain normal credit risk pricing.

Of course, for whether it is an over-issuance of bonds, the majority of investors must also polish their eyes to identify. It can be comprehensively judged from the operating conditions of the enterprise itself, the health of the financial indicators and the purpose of financing, and it is necessary to consider whether the leverage is at a reasonable level according to the financial indicators and operating conditions of different enterprises. Once the financial data and operating conditions of the enterprise cannot support its financing behavior, investors should avoid the relevant investment risks in a timely manner.

Text/Zhou Lin

Image source/Visual China

Edit/Ji Yuan