Case Study On Market-oriented Debt-to-equity Swap Of A Machine Tool Group

Debt-for-equity swap is a special way of debt restructuring,that is,the original creditor's right relationship between creditor and debtor is transformed into equity relationship.In 1999,China implemented the first round of policy-based debt-for-equity swaps,in which the state set up four asset management companies to purchase the non-performing loans of state-owned Banks and strip off bad debts.At the same time,they helped enterprises to reduce the leverage ratio and reduce the operating burden.In this way,the creditor's rights of Banks to enterprises were transformed into the equity of asset management companies to enterprises.In 2016,a new round of market-oriented debt-for-equity swaps was restarted in the context of the new policy,aiming to make use of the decisive force of the capital market to assist the supply-side structural reform and help promising enterprises out of the temporary operating difficulties.As the largest machine tool enterprise in China,A Machine Tool Group is subject to the multiple influences of the market environment and historical burden,and has fallen into the financial dilemma of high leverage.This paper takes the debt-for-equity swap case of A Machine Tool Group as the research object.First,it sorted out relevant literature on debt-for-equity swaps,sorted out the historical evolution of domestic debt-for-equity swaps,and highlighted the characteristics of this market-oriented debt-for-equity swap by comparing the implementation of two rounds of debt-for-equity swaps in China.Secondly,the paper introduces the general situation of A Machine Tool Group's debt-for-equity swap case,the operation situation of A Machine Tool Group before debt-for-equity swap,the causes of debt and the implementation effect of debt-for-equity swap.After that,multiple cases were added to compare the debt-to-equity plan of A Machine Tool Group,focusing on the subject of debt-to-equity swap,the nature and use of funds,and the characteristics of the exit method.Then,the influence and risks brought by debt-to-equity swap were analyzed from the perspective of the effect of relevant parties of debt-to-equity swap.For debt-equity swap enterprises,debt-equity swap can intuitively optimize financial statements in a short period of time and relieve financial burden.For creditor Banks,debt-for-equity swaps can on the one hand reduce the economic losses caused by the non-performing assets ratio,and on the other hand broaden the business scope and increase profits.For sasac,the implementation of debt-for-equity swap can not only promote local deleveraging,but also realize the appreciation of state capital.Finally,the paper draws inspiration from the debt-for-equity case of A Machine Tool Group.Similar enterprises can draw on the model in this case to attract social capital to participate in debt-for-equity swap and get out of financial difficulties,flexibly use debt-for-equity swap funds and make more use of equity investment.Although debt-to-equity swap can relieve the financial stress of enterprises in the short term,its role is limited,and it is difficult to affect the subsequent operation of enterprises.It cannot fundamentally improve the operating conditions of enterprises.Enterprises need to achieve self-rescue if they want to truly improve their own profitability.