Study On The Operation And Effect Of Debt-for-equity Swap Of State-owned Enterprises

At present,the leverage ratio of China's non-financial enterprises keeps rising,while in the non-financial corporate sector,the leverage ratio of state-owned enterprises is relatively high,and it is urgent to take measures to reduce leverage.In order to promote the smooth operation of China's economy and reduce the leverage ratio of enterprises,the state has vigorously implemented the policy of "three cuts,one cut,one remedy" and adopted debt-equity swap as an important measure to reduce leverage.In this context,China railway actively responded to the call of the state and began to plan and implement the debt-equity swap in June 2018.China Great Wall led and joined with another eight investment institutions to reduce the debt pressure through the debt-equity swap of four subsidiaries,becoming the first central construction enterprise to implement the debt-equity swap.Taking China railway as the research object,this paper analyzes the motivation,operation design,effect and potential problems of its debt-to-equity swap from all aspects and finds that :(1)the characteristics of the infrastructure industry lead to the widespread problem of high asset-liability ratio in the industry,and debt-to-equity swap can effectively reduce the leverage ratio in a short term;(2)the debt-for-equity combination of China railway "the debt collection convertible" "in debt" two kinds of model,and through the "first subsidiary debt convertible issuing shares in return for subsidiary equity" in the "two-step" approach to speed up the project schedule and strengthening institutions to participate:(3)the creditor's rights and equity pricing is fair and ignorance real debt terms,although there are some flaws,but basically accord with market requirements;(4)in terms of the implementation effect,the debt and interest expenses of the enterprise are obviously reduced,but the debt is being reaccumulated,while the cash flow pressure of the enterprise is still not small,the improvement of the financial performance of the enterprise needs to take multiple measures at the same time;(5)Under the negotiation of both parties,China railway made concessions,introduced strategic investors to participate in the company's management,amended the company's articles of association,and improved the risk prevention and control system,which made a big step in the improvement of its governance structure.Finally,based on some problems found in the research,some Suggestions are put forward for enterprises to carry out debt-equity swaps in the future.