A Case Study On Market-Oriented Debt-to-Equity Swap Of CREC

As China's economic development has entered the "new normal",the disadvantages of relying on investment and leverage to drive rapid economic growth in the past have gradually emerged,and the excessively high leverage ratio of the real economy sector has seriously restricted the healthy development of China's economy at present.As an important measure of "three cuts,one cut and one supplement" in the supply-side reform,market-oriented debt-for-equity swap plays a decisive role in "deleveraging".However,since the implementation of market-oriented debt-forequity swap in 2016,it has been in the awkward situation that more contracts have been signed and less contracts have been executed.Many enterprises still keep a wait-and-see attitude towards it,and they are quite confused about whether to carry out market-oriented debt-for-equity swap and how to implement market-oriented debt-for-equity swap.In this paper,the recent successful implementation of the marketization of debt-the leading enterprises in the construction of the project of CREC as case study object,analyzed the pattern of the marketization of CREC bonds convertible,influence and risk,in order to address the current market debt convertible has provided the new mentality,the difficulty of the ground,also for other companies to decide whether and how to implement the marketization of debt turn to provide the reference.This paper studies the market-oriented debt-for-equity swap model of CREC from an innovative perspective,and refines the previous fuzzy "two-step" debt-for-equity swap model into a "hybrid three-step" model,systematically analyzes the implementation process of debt-for-equity swap of CREC,and mainly expounds the "how to implement" the market-oriented debt-for-equity swap model of CREC corporation.After clarifying the implementation path,the paper then analyzes the impact of the implementation of market-oriented debt-for-equity swaps on enterprises from four dimensions: market effect,financial impact,governance structure impact and enterprise value impact.One is to use event study method in the process of CREC debt turned stock market reaction of two important time node was analyzed,and the second is the use of financial index evaluation method and radar map method are analyzed from the points of view of vertical and horizontal two debt-for-equity short-term financial conditions of the enterprise,improve re-understanding ownership structure,the management group,the company's articles of association analysis market debt convertible to the impact of corporate governance structure,four is to use the free cash flow discount model analysis of debt turn the impact on the formation of enterprise value.Through thecomparison and analysis of these four dimensions,this paper aims to analyze the question of "whether it is worth to carry out the market-oriented debt-for-equity swap".Finally,the article discussed in stages in the CREC may be met in the implementation of marketization of debt turn risk,including convertible stage risk,equity risk,equity exit stage risk management stage,through to the eight specific risk point in the debt-to-equity swap,the emphasis on the debt market turn "what are the implementation of risk" problem.After a comprehensive analysis of the cases,the paper draws the following three conclusions:first,the new debt-to-equity model of CREC 's "hybrid three-step" approach is feasible and can effectively solve the problem of "difficulty in landing" of debt-to-equity funds,which is worthy of reference for other enterprises.Second,the implementation effect of market-oriented debt-for-equity swaps is obvious but has limitations.Enterprises should weigh various factors when deciding whether to implement debt-for-equity swaps.Third,the implementation risk of market-oriented debt-for-equity swap is higher than that of policy-based debt-for-equity swap,but the overall risk is controllable.Based on the analysis and summary of CREC's market-oriented debt-for-equity swaps,this paper puts forward several Suggestions to provide reference for all participants in the market-oriented debt-for-equity swaps.