Research On The Mode Of "Two Steps" Debt To Equity Swap

In order to reduce the leverage ratio of enterprises,reduce debt default and effectively prevent financial risks,China launched a new round of debt to equity swap in October 2016.However,as a whole,the market-oriented debt to equity swap is characterized by more intentional contracts,fewer actual projects and low capital availability.One of the important reasons is the lack of a mature debt to equity swap model.In this case,the "two-step" debt to equity model used by the case company China Shipbuilding Industry Company Limited is an important innovation.From the perspective of debt enterprises,this paper takes China Shipbuilding Industry Company Limited as an example,and analyzes the "two-step" debt to equity model from the following three aspects.First of all,this paper analyzes the "two-step" debt to equity mode of China Shipbuilding Industry Company Limited from three aspects: the first step is to implement debt to equity conversion at the subsidiary level,the second step is to convert the equity of unlisted subsidiary into the equity of listed parent company,and the restriction on the shareholders' rights of investment institutions in the "two-step" process.It is found that there are many advantages in implementing debt to equity swap of China Shipbuilding Industry Company Limited through the "two-step" mode: "The first step" implemented debt to equity swap for Dalian shipbuilding industry group Co.,Ltd and Wuchang Shipbuilding Industry Group Co.,Ltd,the subsidiaries with high debt ratio,achieving two goals with one stone,not only reducing the leverage ratio of the subsidiaries,helping the subsidiaries to overcome the stage difficulties,but also reducing the asset liability ratio of the parent company,China Shipbuilding Industry Company Limited,and reducing its financial burden;The second step is to transfer the unlisted subsidiary's equity held by the investment institution due to debt to equity swap into the equity of the listed parent company,so that the un-circulating equity can be freely circulated after the lock-in period,which successfully solves the problem of equity withdrawal;The restriction of shareholders' rights in the "two steps" is designed for the status of China heavy industry's military enterprises,which is of great significance to the maintenance of national security.Secondly,it analyzes the implementation effect of debt to equity swap of "two steps" of China Shipbuilding Industry Company Limited.Through horizontal comparison and vertical comparison,it is found that the company's solvency,operation ability,profitability and growth ability have been improved after debt to equity swap;moreover,the implementation of debt to equity swap enriches the company's equity structure,supervises and promotes the company's operation and management,stabilizes the ship industry market to a certain extent,and promotes the reform of state-owned enterprises.It shows that China Shipbuilding Industry Company Limited has achieved good results by using the "two-step" mode to implement debt to equity swap.Finally,it analyzes the applicability and shortcomings of the "two-step" debt to equity model,and puts forward optimization suggestions.This paper summarizes the characteristics of enterprises that are suitable for debt to equity swap in the "two-step" mode: first,large group companies with complex debt to asset relationships;second,companies with high debt ratio of their important subsidiaries;Third,listed companies whose shares can be freely circulated and transferred;fourth,companies that do not want to be affected by investment institutions or strategic enterprises related to national security after debt to equity swap.The "two-step" debt to equity model can provide useful reference for enterprises meeting the above four characteristics to solve the problem of high asset liability ratio,promote the effective implementation of the market-oriented debt to equity policy.