Research On Deleveraging Countermeasures Of M Company

In the early stage of China’s rapid economic development,some enterprises made some achievements by relying on debt leverage.However,as China’s economic growth slows down and the market environment is complex and changeable,most enterprises face difficulties in transformation and upgrading.High leverage operation makes the debt risk of the company increase,and the overall financial risk keeps increasing.In 2016,The State Council issued the Opinions on Actively yet Prudently Lowering The Corporate Leverage Ratio,and in 2019,relevant ministries and commissions issued the Main Points of Work on Lowering the Corporate Leverage Ratio in 2019,setting out a 21-task list and completion schedule,including promoting market-oriented debt-equity swaps,promoting strategic restructuring and speeding up the liquidation of "zombie enterprises".In the task list,most of the completion time is marked as continuous progress,indicating that the deleveraging of China’s soes needs continuous progress.The power industry is a capital-intensive and asset-heavy industry.During the construction period,a large amount of capital needs to be invested in construction.The debt financing model of bank loans is generally used for financing,so the leverage ratio is generally high.At the end of 2018,four of the five centrally-owned power generation groups had an asset-liability ratio near 77%,and some of the subordinate companies’ debt ratios had exceeded 100%,making them insolvent.Excessive asset-liability ratio has threatened the safety of the development of my country’s power industry.Therefore,it is particularly important to take active and prudent measures to reduce the scale of liabilities and ensure the stable development of enterprises.On the basis of elaborating the research background and significance of deleveraging,this paper sorts out the motivations,countermeasures and implementation effects of deleveraging at home and abroad,combines relevant theories,takes M company as the research object,and uses case analysis methods,literature research methods,etc.An analysis of the motivation of M company’s deleveraging,it is found that M company’s deleveraging is due to its large scale of liabilities and insufficient cash flow due to its high-leverage development,coupled with the national supply-side reform,the slowdown of economic growth in M ??province,policy changes and other factors.In order to resolve the high debt risk,Company M adopted three measures to reduce the company’s leverage: "debt-to-equity swap",accounts receivable asset-backed securities,and stripping of non-performing assets.Through quantitative analysis of the implementation effect of its deleveraging measures,it is found that the debt-to-equity swap measures taken by it have greater risks,and the reasons for its shortcomings are analyzed,and corresponding optimization measures are given.The results of the study show that the deleveraging measures taken by M Company reduced financial leverage in the short term.However,the debt-to-equity swap of name-equity and real-debt does not fundamentally reduce the financial risk of the company.On the contrary,because it belongs to mezzanine capital,the cost of capital must be higher than the cost of debt and lower than the cost of equity,and the benefit of interest tax deduction is weakened and increased.The company’s financing costs may increase the company’s financial risk.Therefore,when choosing deleveraging countermeasures,we should take advantage of our own advantages and choose appropriate deleveraging measures to reduce financial risks based on long-term interests.