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

Debt-for-equity swaps is a form of debt restructuring that converts debt into capital.The concept of "debt-for-equity swap" first appeared in China in 1999.In order to reduce the non-performing loan ratio of commercial banks,the government carried out policy-based debt-for-equity swap.In the short term,it achieved certain results in revitalizing the non-performing assets of banks,but it could not fundamentally deleverage enterprises.In 2016,the corporate leverage ratio rose again.In line with the national goal of "three deleveraging,one reduction and one subsidy",debt-to-equity swaps surfaced again.A new round of debt-to-equity swaps is called market-oriented debt-to-equity swaps,which is different from policy-based one.At present,The problem of less market-oriented debt-for-equity swap projects of private enterprises needs to be solved urgently.With the continuous improvement of the market mechanism and the further refinement of regulatory policies,market-oriented debt-to-equity swaps show more diversified features,and market-oriented debt-to-equity swaps have been recognized by more and more listed companies and investment institutions.Compared with the early cases in 2016,the recent cases have some innovations in the equity swap mode and post-investment management,and the scope of implementation entities was expanded,private enterprises are also gradually involved.In the context of China’s supply-side reform and structural adjustment,many private enterprises have encountered temporary difficulties such as high leverage ratio and financing difficulties in their operation and development,and Xinte Energy is no exception.In order to effectively relieve the debt pressure,reduce the financial risk and enhance the enterprise’s long-term operation and development resilience,Xinte Energy decided to adopt the market-oriented debt-for-equity approach to carry out strategic investment to enhance the competitiveness and business strength of the enterprise.This paper mainly studies the application of the market-oriented debt-for-equity swaps of the private enterprise,selecting Xinte Energy as the research object.It first introduces the concepts of debt-for-equity swaps and theoretical basis,analyzes the current situation of its development and lists several modes of a new round of debt-for-equity swaps.Then it highlights the differences between the two rounds of debt-for-equity swaps and analyzes the implementation of market-oriented debt-to-equity swaps in private enterprises.The case first introduces the operation status and industry development of Xinte Energy,and analyzes the motivation and feasibility of its market-based debt-for-equity swap based on the economic background and the policy provisions.This paper focuses on Xinte Energy’s specific application of market-oriented debt-to-equity swaps,highlighting the project’s characteristics.The characteristics include the selection of high-quality subsidiaries as the stock conversion targets,market pricing and the adoption of "priority distribution rights + repurchase + third party transfer + deferred interest jump + conversion to perpetual debt" income arrangement and exit mechanism.Then,financial index analysis and event study method are used to analyze the financial impact and market reaction of the debt-for-equity swap project on Xinte Energy and its target Xinjiang New Energy,and it is also analyzed from the perspective of corporate governance and strategic transformation,as well as the risks and problems existing in the debt-for-equity swap project.Finally,based on the research and combined with the current situation of China’s private enterprises to implement debt-to-equity swaps,this paper puts forward suggestions,to provide reference for the implementation of market-oriented debt-to-equity swaps of private enterprises.