Research On The Application Of Market-oriented Debt-to-equity Swap In Central Enterprise

Debt-to-equity swap as a way to solve the risk of bad debt in banks and companies' high leverage ratio,has been used in many countries.At the end of the 20 th century,in order to revitalize the bank's non-performing assets and turn the losses of state-owned enterprises into profits,China carried out the first round of policy-based debt-to-equity swaps.At that time,in the process of implementing debt-to-equity swap,the government set up four asset management companies through administrative means to dominate the list of enterprises,determine the price of the swap and the losses are borne by the national finance.Although the implementation of this round of debt-to-equity swaps has achieved good results in the short term and brought a turning point to China's economy.However,with the development of time,the results are not satisfactory.Nowadays,in the face of economic downturn,corporate leverage is high,and some industries have severe overcapacity.After a lapse of 17 years,China's new round of debt-to-equity swaps has restarted.Compared with the previous "policy",this round of debt-to-equity swaps has placed more emphasis on marketization and legalization.The two-round debt-to-equity swaps have completely different connotations.This paper takes CSICL,which is the “first order” for the market-oriented debt-to-equity conversion of military-owned enterprises,as the research object to explores and analyzes the market-oriented debt-to-equity swap,in order to provide reference for the successful implementation of other corporate debt-to-equity swaps.Firstly,this paper summarizes the research status of debt-to-equity swap,and then,based on the elaboration of the concept of debt-to-equity swap and related theories,taking CSICL as an example,explores the new path of debt-to-equity swap and the various impacts of its implementation.In the case analysis stage,this paper firstly analyzes the current situation of market-oriented debt-for-equity swap of China's central enterprises,and further verifies that it is indeed necessary and feasible for central enterprises to conduct market-oriented debt-for-equity swap by introducing the basic situation of CSICL,the reasons for the debt-for-equity swap and the specific debt-for-equity swap scheme.Through evaluate the effect of debt-to-equity swap in case enterprises,the paper points out the leverage ratio of enterprises is effectively reduced by the implementation of debt-to-equity swap in case enterprises.In turn,it enables enterprises to steadily expand the overall business scale of enterprises under the condition of reducing the probability of financial risk occurrence,and help enterprises to rapidly improve their profitability when the whole shipping industry warms up.The paper also emphasizes that the successful completion of the debt-to-equity swap of case enterprises effectively improves their ability of scientific and technological innovation;the design of the "two-step" scheme strengthens the control of the target company,explores a new path with certain duplication for the debt-to-equity swap,and sets a model for the implementation of the debt-to-equity swap of other state-owned enterprises.Finally,based on the analysis of the case of corporate debt-for-equity swap,the paper puts forward some Suggestions to promote the development of debt-for-equity swap from selection criteria of debt-to-equity swap enterprises and optimum design of debt-to-equity swap scheme.