| With the deceleration of macro-economic growth,the upgrading of industrial structure,real economic pressure increases,some enterprises have difficulty in operating,leverage ratio remains high,and debt defaults occur frequently.Besides,Banks have high non-performing loan ratios,and the financial risk has increased.The debt-to-equity swap is one of the feasible ways to reduce the indebtedness of enterprises and resolve the financial systemic risks.China has implemented debt-to-equity swaps twice.The first round of debt-to-equity swaps,i.e.policy debt-to-equity swaps,was implemented against the background of the Asian financial crisis in 1997,which hampered the pace of China’s economic development and resulted in high nonperforming market players,and the government took the lead in helping enterprises to implement debt-to-equity swaps to resolve the crisis.The first round of debt-to-equity swap solved the bad credit problem of banks and effectively dissolved the bad credit of state-owned commercial banks,but at the same time there was also the problem of excessive financial burden on the government.Moreover,in the first round of debt-toequity swap,the participants were mainly state-owned enterprises,while the participation of private enterprises was low,but since private enterprises account for a relatively high proportion of Chinese enterprises,the purpose of reducing the high leverage level of real enterprises will not be truly achieved if there is a lack of active participation of private enterprises.For this reason,China launched the second round of debt-to-equity transfer,i.e.market-based debt-to-equity transfer,in 2016.Compared with policy-based debt-to-equity transfer,which is led by the government,the marketbased debt-to-equity transfer implementation agency and the content of the debt-toequity transfer program are negotiated and decided by market players,absorbing more social funds,and the participants bear their own risks and returns.The State Council issued the "Guidance on the Conversion of Market-based Bank Debt to Equity" in 2016,expressing an affirmative and supportive attitude from the national level on the economic effect that market-based debt-to-equity conversion can play for enterprises."The Opinions on Actively and Steadily Reducing the Leverage Ratio of Enterprises"issued at the same time also encouraged enterprises to reduce their leverage ratio through market-based debt-to-equity conversions to drive economic efficiency,complete their transformation and development faster and more steadily,and avoid falling into financial distress.As of the end of 2019,although the investment scale of China’s market-based debt-to-equity transfer has exceeded one point four trillion,the range of industry sectors and localities implementing debt-to-equity transfer is expanding,and more than twenty projects of debt-to-equity transfer by private enterprises themselves have been successfully landed,the number of private enterprises participating in debt-to-equity transfer is far lower than that of state-owned enterprises,which is dozens of times higher than that of private enterprises,in terms of quantity.The participation of private enterprises in the market-based debt-to-equity conversion has not been significantly increased,and the process is relatively slow,which is still a problem that the current market needs to pay attention to.The existing literature is more on theoretical research on debt-to-equity conversion,limited to qualitative analysis,and lacks case studies on a series of programs and effects of debt-to-equity conversion for enterprises.At the same time,most of the literature is focused on the debt-to-equity conversions of state-owned enterprises,and few articles have studied the effects of debt-to-equity conversions from the perspective of private enterprises,and there are few suggestions for the implementation of debt-to-equity conversions in private enterprises.In view of this,this paper takes private enterprises as an example,by examining the current national policy combined with the motivation of the necessity of their own debt-to-equity conversion,the specific scheme of debt-toequity conversion is elaborated and analyzed,and the economic effect that marketbased debt-to-equity conversion can bring to private enterprises is studied more intuitively.In this paper,through case studies,I take private enterprises Yuanxing Energy and Huarong Energy as the research objects,and study the possible impact of debt-to-equity conversion on the performance management of private enterprises,from the current industrial background faced by energy enterprises,the government’s policy support,the main reasons for the company’s own debt-to-equity conversion,and the characteristics of the debt-to-equity conversion program,by comparing the significant changes in important financial indicators before and after the debt-to-equity conversion.By comparing the significant changes in important financial indicators before and after the debt-to-equity conversion,the following conclusions were drawn:first,through the market-based debt-to-equity conversion,the two companies reduced their leverage ratios in the short term and played a positive role in corporate transformation in the long term;second,the implementing institutions were also positively impacted.The implementation agency has gained some income through the market-based capital conversion and equity conversion as well as the related investment experience,and the loan issues and social credibility have also had a positive effect,which has deepened the willingness to cooperate with the debt-to-equity conversion enterprises in the future;thirdly,the assignment of new directors in Yuanxing Energy’s debt-to-equity conversion program helps the enterprise to better adjust and improve its operation structure and optimize its own resource allocation,which can give other enterprises the opportunity to Fourth,from a macroscopic point of view,private enterprises,which occupy half of China’s economic development,can not only alleviate debt pressure through market-based debt-to-equity conversion,help those enterprises with temporary difficulties to smoothly pass the economic transition period and realize the regeneration of high-quality enterprises,but also,if combined with the continuous development and enhancement of enterprise capacity,in a sense,promote the development of the entire social economic development.Finally,this paper gives suggestions and insights from two perspectives:the participants of the debt-to-equity swap and the macro perspective of the government.First,private enterprises should improve the competitiveness of market-led debt-toequity conversion,optimize the implementation plan of debt-to-equity conversion from multiple perspectives,and strive for a plan that is suitable for the current situation and future development direction of the enterprises themselves.Secondly,one of the implementation agencies of the participants,such as Everbright Sun Life in this paper,can actively develop the market,adhering to the positive psychological implication of more attempts to invest in debt-to-equity swap enterprises,which can not only enhance their own additional interest income and return of capital flow,but also attract more enterprises in the investment market to reach a deeper level of cooperation.Finally,in the macro perspective,to strengthen government departments to promote market-led debt-to-equity conversion of private enterprises,reduce market resistance,effectively reduce the risk of high leverage ratio that private enterprises may face,and promote the vigorous development of the private economy.The purpose of this study is to provide more ideas on debt-to-equity conversion,and hopefully to provide suggestions for enterprises that are interested in implementing market-based debt-to-equity conversion but are at the early stage of confusion,and also to help those enterprises that have already conducted or will conduct debt-to-equity conversion to reflect on the shortcomings of their own debt-to-equity conversion plans and improve their final plans,so as to provide ideas and inspiration for enterprises that are suitable and want to implement market-based debt-to-equity conversion. |
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