Comparative Analysis Of The Mode Of Enterprise Market-oriented Debt-to-equity Swap

Along with our country macroeconomic growth speed slow,the structural problems in the process of economic development slowly highlighted.In order to promote economic development,China has put forward five major tasks of “cutting overcapacity”,“reducing excess inventory”,“deleveraging”,“lowering costs”,and “strengthening areas of weakness”.“Deleveraging ” aims to achieve economic transformation and upgrading,and put forward a series of powerful policy measures such as market-oriented debt-toequity swaps,to realize the aim of cutting down debt and optimizing financial structure.The Guiding Opinions on debt-to-equity conversion of market-oriented banks have prompted numerous businesses to respond to national regulations and actively promote such projects in order to gain greater economic advantages.Zhongjin Gold innovative “three-step” comprehensive debt-equity swap model of injecting high-quality assets and leveraging social funds on the basis of the “two-step”model is more practical and innovative.Under the guidance of relevant securities policies,Huayang Shares has become the first listed company in China to choose debt-preferred stock swap,which has a certain demonstration role for other listed companies.Therefore,this paper chooses Zhongjin Gold and Huayang Shares as cases to analyze and summarize the characteristics and applicability of the “three-step” model and the “debt-preferred stock” model in the market-oriented debt-equity swap model.Firstly,This paper commences with an overview of the research of both domestic and international scholars on debt-to-equity swaps,and then proceeds to analyze the theories of motivation,implementation effect,operation mode,and exit mode of market-oriented debt-to-equity swaps.Secondly,it provides an overview of the definition of market-based debt-to-equity swaps,as well as several main implementation models in the market,and demonstrates the similarity between the two models chosen.Then,it introduces the market-oriented debt-equity swap project plan of Zhongjin Gold and Huayang Shares respectively,as well as the design of relevant provisions,to provide the basis for the following analysis.Zhongjin Gold completed the market-oriented debt-equity swap by introducing institutional investors to increase capital,issuing shares to purchase assets and raising supporting funds,while Huayang completed the market-oriented debt-equity swap by raising funds to repay debts through non-public offering of preferred shares.Then,this paper analyzes the fund-raising methods,implementation benefits and equity withdrawal methods in the market-oriented debt-equity swap program of Zhongjin Gold and Huayang Shares.Among them,Zhongjin Gold chooses cash and creditor’s rights to raise matching funds for subsidiary capital increase and issuance of ordinary shares,while Huayang Shares chooses to issue preferred shares to raise funds;Through the factor analysis method to analyze the financial effect of Zhongjin Gold and Huayang Shares before and after the implementation of debt-equity swap;Zhongjin Gold allows investors to exit in the secondary market through share exchange,while Huayang shares exit through buyback terms and listing transfer on specific platforms.Finally,through the previous analysis,the characteristics of the two models are summarized from three aspects: the fund-raising method,the implementation effect and the exit method.The “three-step” mode of Zhongjin Gold has the advantages of fast fund raising and clear exit channels,but it has high requirements on the qualification of the introduced investors,and the implementation effect is significant in the short term,and the solvency will decline in the long term.The mode of debt-for-preferred stock conversion of Huayang Shares has the advantages of safe raising of funds,inquiry to determine the repurchase terms,and significant improvement of debt paying ability,but it has the disadvantages of preferred stock issuance restrictions,difficult withdrawal,and reduced operating capacity.Then it summarizes the applicability of the two models according to the implementation plan and model characteristics of debt-to-equity swaps,and provides certain reference and guidance for other enterprises to further promote the development of market-oriented debt-to-equity swaps.