Research On Operation Mode And Performance Of AECC AP’s Market-oriented Debt-equity Swap

In recent years,due to the downward pressure of the economy,many non-financial enterprises have taken on huge debts and their leverage ratio has gradually increased.In this context,in October 2016,The State Council issued a market-oriented debt-equity swap policy to reduce corporate leverage ratio and help high-quality enterprises tide over difficulties.AECC Aviation Power Co.,Ltd(abbreviated as AECC AP)seized the policy opportunity to prepare for a debt-equity swap,after negotiation and communication with various subjects,the three wholly-owned subsidiaries of AECC AP are finally taken as the target,at the same time,diversified strategic investors are introduced to increase capital and reduce debt of the target company in the form of cash and debt,this is the first successful case to lock in all investors at the board stage.Taking this as the research object,this thesis focuses on the analysis of the operation mode of the debt-equity swap of AECC AP,and comprehensively analyzes the implementation performance of the debt-equity swap by using the event study method and financial index method.On the mode of operation,AECC AP selects high-quality enterprises as the target company,the implementation process fully reflects the principles of marketization,at the same time,combined with their own actual situation to design a trading scheme,set up pricing procedures and exit channels in a scientific way,and introduce a price adjustment mechanism to protect the rights and interests of implementing agencies,detailed plans have accelerated the financing landing speed;In terms of performance,after the debt-equity swap,the Capital markets are showing positive effects,the capital structure of enterprises has been optimized,and their debt paying ability and development ability have been improved,but they still need to make efforts for long-term development.At the same time,this debt-equity swap also has the risk of being greatly affected by the market,shareholders’ rights and interests are difficult to protect,and enterprises borrow again,which should be paid attention to.Four enlightenments can be drawn from the case analysis: first,qualified enterprises should seize the policy opportunities and actively seek diversified strategic investors;Secondly,we should design trading scheme and innovate operation mode according to our own needs.The third is to build a systematic valuation and pricing system to protect the rights and interests of implementing institutions and promote the smooth implementation of transactions;Fourth,the implementation process should meet the requirements of compliance and follow the principles of marketization.At the same time,in order to further consolidate the implementation effect,it is suggested that enterprises should pay attention to the protection of rights and interests of minority shareholders in the later stage,take measures to improve their own operating capacity and profitability,strengthen leverage constraints,avoid excessive borrowing again,and do a good job in risk prevention.