Analysis On The Effect Of Debt-to-equity Swap Of Large State-owned Enterprises In China

Debt-for-equity swap refers to the purchase of non-performing assets by qualified professional institutions to transform the creditor’s rights and debt relationship between Banks and enterprises into the equity and property rights relationship between qualified professional institutions and enterprises.Theoretically speaking,debt-for-equity swap can reduce the debt level of enterprises,increase their capital,get them out of financial difficulties and improve their governance structure.Therefore,in order to cooperate with the "three to one drop a repair" the task of structural adjustment,reduce the corporate leverage,in October 2016,the state council issued "the guidance of marketization of bank debt to equity",encouraging Banks,qualified professional institutions and enterprises to develop debt-to-equity swap in accordance with the principle of marketization,legalization,launched a new round of debts into shares.In this round of debt-to-equity swaps,there are not only problems such as a large amount of signed funds but a small amount of actual landed funds,but also cases such as China CSSC Holdings Limited that have implemented debt-to-equity swaps.Then,what are the reasons for the difficulty in implementing the debt-to-equity swap plan and what measures can be taken to solve this problem?What is the effect of China CSSC Holdings Limited debt-to-equity swap?Has it achieved the expected goal?In order to find the answers to these questions,it is necessary to analyze typical cases of debt-for-equity swaps.China CSSC Holdings Limited ranks second among the advanced shipbuilding industry in China,and is also the largest civil ship repair and manufacturing enterprise in China,ranking among the top in the world shipbuilding industry.Therefore,this paper takes the case of China CSSC Holdings Limited debt-for-equity swap as the research object.Firstly,this paper sorts out the literature on debt-for-equity swaps and expounds the theoretical basis of the research.Based on the detailed introduction of the basic situation of China CSSC Holdings Limited and the operation mode and process of implementing market-oriented debt-to-equity swap,this paper studies the characteristics of the implementation scheme of debt-to-equity swap of China CSSC Holdings Limited,and emphatically analyzes the implementation effect of debt-to-equity swap in the aspects of finance,equity structure and corporate value of China CSSC Holdings Limited.According to the analysis results,the following conclusions can be drawn:a reasonable debt-for-equity model and debt pricing can help the parties concerned to reach an agreement;Debt-for-equity swap has a significant effect on the company’s financial impact,The debt-to-equity conversion realizes the conversion of creditor’s rights to equity,and improves the company’s equity structure.Debt-for-equity swaps will reduce the cost of capital and thus increase the value of the company.Based on the above conclusions,the paper argues that China’s large state-owned enterprises should pay special attention to guard against the possible risks of debt-to-equity swaps,improve the corporate governance structure,and further improve the effectiveness of the capital market.