Analysis Of Merger And Reorganization Of Debt Disposal In Steel Enterprises

In recent years,the development of China’s steel industry has been slow.The increase in its leverage rate has also made the debt issue of the steel industry prominent.In February 2016,the "Opinions of the State Council on Resolving Overcapacity in the Iron and Steel Industry to Realize the Development of Poverty" pointed out that the steel industry has a major task of structural reform on the supply side and supports the use of market-based measures to properly handle the companies’ debt issue,supports the merger and reorganization of steel companies and puts forward new ideas for overcapacity in steel industry.This actually gives policy support to the development of steel enterprises.Statistics show that the asset-liability ratio of China’s steel industry has risen year by year after breaking through 60% in 2008,and reached the highest point in recent years in March 2017.On the one hand,during the period from 2008 to 2013,many steel companies expanded capacity projects,leading to increased bank debt;on the other hand,from 2008 until 2016,the entire steel price has long been in a down channel,making it very much The solvency of the companies is weakened.The combination of these two causes makes the debt problem of steel particularly prominent.Debt problems will inevitably become issues that must be faced by the steel industry in recent yearsBased on this,this paper takes the debt problem of steel industry as the starting point,using case analysis method,focusing on the case of Baowu steel,through the comparison of the main indicators of Baoshan steel and WISCO before the merger and reorganization and Baowu steel after the merger and reorganization,the success of Baowu steel in adopting the debt disposal method of merger and reorganization is obtained.Under the background of supply-side structural reform,Baowu merger is the first single steel enterprise merger case since the steel industry entered into overcapacity in 2011,which has a milestone significance in the steel industry.This paper not only makes a comparative analysis of the financial statements of Baoshan steel,WISCO and Baowu steel after the merger and reorganization,but also deeply analyzes the root cause of Baowu steel adopting the merger and reorganization to dispose the debts of WISCO,and sums up the reasons behind the huge debts of WISCO shares are related to various factors,such as the influence of excess capacity,low industrial concentration and the reverse trend development of WISCO,etc.In order to solve the debt problem of WISCO,the merger and reorganization of Baowu conform to the policy and trend,on the surface to solve the financial difficulties of WISCO,in fact to solve the root of the debt problem of WISCO.Baowu merger,improve the debt security of WISCO shares,WISCO’s huge debt did not make the advantage of Baoshan steel " burden",also let the inferior enterprise WISCO slowly out of the Woods,for the future merger and reorganization provides support and confidence.The method of debt disposal by merger and reorganization conforms to the national policies and objectives,and can be extended to other steel enterprises,even other overcapacity industries,which has great significance of the times and reality.