In Shanghai, a group of private equity experts are discussing the private debt of small and medium-sized enterprises.

For private equity with a keen sense of smell, they have already discovered the huge opportunities here.

Because private debt in the United States is equivalent to junk debt, and junk debt in the United States can only be done by investment banks, but in China, investors with an investment of not less than 654.38 million can participate as long as they meet certain conditions.

Where are these opportunities for private placement?

On the one hand, they feel that the scale of private placement debt is relatively small, and for some private placements with less funds, a combination of multiple different bonds can be established. In addition, although private debt is risky, its scale has not attracted large banks to inspect it. Only Dagong, United Credit, China Chengxin Securities, New Century, Pengyuan and Oriental Jincheng can rate private debt. Some private investors feel that they can do research and build their own information advantages.

I heard that they mainly have two methods of operation.

One way is to amplify the bond yield leverage. They plan to raise low-interest loans through banks, use these bonds as collateral, and then use trust accounts to amplify leverage by five times, and conduct several rounds of private debt issuance a year.

They will directly take over the junk bonds issued by themselves with their trust accounts, which is equivalent to the role of underwriters, and may have a "wholesale price" of about 2%. Then they will issue these bonds to the market, and get a direct income of about 2%. Because the lever is enlarged by 5 times, it is equivalent to earning 10%. If more than one such bond is underwritten every year, it will be far more than 65438+ per year.

However, they also have some concerns about this method, mainly market liquidity. After all, China's bond market is multi-headed, including exchange market and inter-bank market, and there are five regulatory agencies. Obviously, it is not easy to solve this problem of multi-head supervision. They think that China may pass the bond market in the future, but it will take time.

Another way is to master some private debt with good qualifications and good returns through careful investigation, and they will take it from beginning to end, which is equivalent to establishing a junk debt portfolio as Mike milken, the king of junk stocks in the United States, first did.

When analyzing the performance of junk bonds from 1945 to 1965, milken found that diversification of long-term low-grade bonds can bring higher returns than investment in blue-chip high-grade bonds, and the risk is not greater than the latter. During the period of 1974, milken felt the opportunity came, because at that time, the inflation rate and unemployment rate in the United States were rising, credit was severely tightened, and the credit ratings of high-return bonds in the portfolios of many fund companies were downgraded, and many fund companies sold them at no cost. However, milken's "First Investor Fund" firmly holds these "junk bonds". As a result, from 1974 to 1976, this "first investor fund" focusing on junk bonds has become the best-performing fund in the United States for three consecutive years, and its scale has grown rapidly.

But will China's private debt be the same as that of the United States?

This group of private placements found that the foreign bond market is very large, and many foreign institutions are willing to make bonds, because the risk is low and the securities fluctuate too much. Although the bond market in China is small, everyone thinks that private debt is an ideal development direction in the future. After all, there is a bottleneck in China's current economic development: the dividend of reform and opening up has ended, and the dividend of WTO has almost ended-the production cost in Southeast Asia is lower, so what advantages does China have? In their view, in order to revitalize the economy and prevent most investors from having no direction, it is necessary to diversify investment, further open the capital market and attract more and more private capital. In this context, private debt will develop at a very high speed.

They are also very aware of the risks of private debt, and they believe that the high returns of the first batch of private debt are unsustainable. Because the first batch of 19 companies that issued private debt raised 1 8.5 billion yuan, the basic single scale was between 10 million yuan and 250 million yuan, the term was between13 years, and the interest rate was between 7% and 13.5%.

These people in the industry are well aware that the first batch of domestic pilots will be very successful, but if private debt becomes more and more market-oriented, it will definitely default and become a high-risk and high-yield variety.

However, everyone hopes that the default will appear earlier, so as to control the default ratio like market-oriented bonds. They have studied the junk bond market in the United States, and the default rate of junk bonds in the United States is 12%, generally between 2% and 5%.

This is their last mode of operation-a quantitative tool for buying and selling private debt. They established a risk control model by studying the default rate. In their view, as long as the risk can be controlled, they will find a stable income.