The Study On Value Creation Mechanism Of Non-performing Assets Restructure In China

The disposal of non-performing assets is a problem about financial system stability and a common international issue. International experience shows that whether indisposed non-performing assets will pose threat to the entire economic system, even lead to financial crisis and economic recession. The proportion of non-performing assets has been living in high since the build-up of China's banking system. To focus on specialized disposal methods, the four financial asset management companies were set up, referring to the characteristics and size of the non-performing assets in China after the Asian financial crisis. The four companies received a total of 2 trillion non-performing assets from the banking system, reducing the burden of the banks, and also have laid the foundation for the China's banking reform, contributing to the development of the banking industry.However, the financial asset management companies were faced with the problem of how to deal with those non-performing assets. The asset disposal industry is an emerging industry, there is no reference. After eight years of operation, the four companies have finished the policy disposal task and in turn officially entered the stage of commercial disposal, which has the characteristic of commercial operation, marketable disposal and profitable goal, also has the mean of enhance the value of assets. Therefore, the disposal of non-performing assets should be operated through innovative means to develop the value of assets, and the breakthrough of this main means is the restructure of non-performing assets.In term of the basic restructure theory and situation of China, this paper has analyzed the non-performing assets and its restructure of the financial assets management companies in China, summarize the concepts and theories of the non-performing assets'restructure, explore the major breakthrough of the restructure. Further, this paper has conduced in-depth anatomy of the value-added, all of that are of great significance for the successful operation of the companies. Based on the research of non-performing assets in the financial assets management companies in China by case study, this paper has studied the value enhance mechanism and sum up the framework of this research series. The framework includes whether the restructure create value, how it does and simple analysis and summary about the value distribution of all stakeholders.From the international experience, the valuation of the restructured non-performing assets is undertaken through the DFC model, which is discount free cash-flow model. The character of the non-performing assets in China is complicated causes, poor credit, and large amount and less mortgage assets, these cause the substantive difficulties of the restructure. However, many non-performing assets have great potential value, especially through some restructures, the company can continue to operate and achieve stable cash flow. Judging from China's financial assets management companies'eight years practice, especially in the commercialization transition stage, the restructuring of non-performing assets and the raise of value is effective, not only to maintain the proceed of"to minimize losses", but also part of the assets achieve greater profitability, that means the restructuring of China's financial assets reached a high efficiency level and restructure can indeed create sufficient value.The research on the value creation of non-performing assets'restructures shows that the value is created from the promoting the future cash-flow and lowering the capital costs. The short-term value is from the capital injection of equity and replacement of assets, and the long-term value is derived from the operation of the business expansion in order to achieve the maximization of shareholder rights. In the distribution process, creditors, shareholders, restructure and local government have their own value principles and restructure objectives, based on which, the distribution of these values can be worked out by consultation and negotiation.