Yunnan Tin Company Limited Market-based Debt-to-equity Conversion Case Study

Under the background of structural reforms on the supply side,the state has proposed five major tasks of"Five Priority Tasks",and market-based debt-to-equity swaps have emerged as measures to reduce corporate leverage.The problem of high leverage of enterprises has a long history.In the stage of rapid economic development in China,enterprises rely too much on bank loans to meet their financing needs,resulting in higher leverage ratios of most enterprises.As China’s economic development enters the new economic normal,the slowdown in GDP growth has led to a continuous decline in corporate profits.At the same time,enterprises still have to pay high amounts of debts due and bank interest each year.A large number of enterprises have failed to make ends meet and went bankrupt.Under the double demand of de-leveraging and reducing the non-performing loan ratio of commercial banks,in October 2016,the State Council officially proposed to use Market-oriented Debt-to-equity Swaps as the measures to reduce the leverage ratio of enterprises.This paper selects the market-based debt-to-equity swap of Yunnan Tin Company Limited as the analysis object.First of all,this paper introduced the company profile of Yunnan Tin Company Limited,the two debt-to-equity swaps of Yunnan Tin Company Limited and the Market-oriented Debt-to-equity Swaps plan and implementation.Next,this paper analyzes the financial effect of the market-based debt-to-equity swap of the Yunnan Tin Company Limited.Based on the main financial data in the Yunnan Tin Company Limited’s performance report,it analyzes the solvency,operational capability and profitability of the company through financial ratio analysis.In terms of development ability,it analyzes the changes in financial indicators before and after the conversion of market-based debts of Yunnan Tin Company Limited,in order to explore the effect of Market-oriented Debt-to-equity Swaps on Yunnan Tin Company Limited.After the conclusion that Market-oriented Debt-to-equity Swaps have positive effects on Yunnan Tin Company Limited,the fourth chapter analyzes the market-oriented debt-to-equity conversion stage from three aspects:Scheme design,project fund landing speed and internal environment.Based on the above analysis,this paper further draws some inspirations.Enterprises should implement the following points when implementing Market-oriented Debt-to-equity Swaps:First,in the Market-oriented Debt-to-equity Swaps project,the design of a reasonable debt-to-equity swap plan is the key to the success of the project.The Market-oriented Debt-to-equity Swaps have different operating conditions,different debt causes,and different relationships with loan banks.The design of Market-oriented Debt-to-equity Swaps should have the characteristics of’’one enterprise,one policy",and all relevant entities should he conmbined with the enterprise.Design the schceme according to local conditions.Second,pay attention to the driving effect of higlh-quality assets,so that high-quality assets continue to generate high p.rofits,and promote debt-to-equity companies to improve their financial status and improve their profitability.Third,improve the equity exit nmechanism to ensure that investors can successfully exit through various channels after the project expires,in order to mobilize investors’ investment enthusiasm and b roaden the funding chaninels.Fourth.Market-oriented Debt-to-equity Swaps must be combined with the improvement of the internal environment of enterprises Market-oriented Debt-to-equity Swaps can only improve the capital structure of enterprises,but they cannot directly optimize the operational capabilities of enterprises.In order to max,imize the positive effects of Market-oriented Debt-to-equity Swaps,enterprises should focus on optimizing asset structure,industrial structure and promoting enterprise reform process while implementing Market-oriented Debt-to-equity Swaps projects.Only by solving the various institutional and institutional problems of the enterprise itself from the root causes can we inspire the vitality of the enterprise and make the enterprise develop healthily.Fifth,mainy measures are taken together to ensure that the project funds are put to the ground.The landinrg of project funds represents the formal implementation of the Market-oriented Debt-to-equity Swaps project,which is of great significance.