Research On The Financial Impact Of Company A's Debt-to-equity Swap

At present,China's economic development has entered a new normal.The high leverage ratio of enterprises and the non-performing loan ratio of commercial banks have become risk factors that threaten China's economic development.In order to solve this problem,on October 10,2016,the State Council officially promulgated “the Opinions on Actively and Safely Deciding the Leverage Ratio of Enterprises” and its appendix “Guiding Opinions on Shifting Bank Debt to Equity Ownership,” which has given the debt-to-equity swap a marketable meaning.This article used the literature research method to compare two rounds of debt-to-equity conversion from several aspects,and analyzed the advantages,disadvantages and applies of the five kinds of market-oriented debt-to-equity swap operating models.Subsequently,this article used the case analysis method,taking the Company A as an example,it introduced the background of the implementation of debt-to-equity swaps,explored the causes of corporate debt,and studied the necessity of debt-to-equity conversion from two perspectives:Company A and its parent Company B.According to the national policy and the actual situation of Company A,the feasibility of debt-equity conversion was analyzed.Next,this article analyzed the specific features of Company A's debt-to-equity swap program.In order to explore the impacts of the implementation of debt-to-equity swaps on interested parties,this paper compared the financial data of Company A,its parent Company B and its new shareholder Company C in 2016 and 2017,mainly analyzed the financial impacts of debt-to-equity swaps on these companies.Through the study,it is found that:(1)The fund model has become a mainstream operating model in the current market due to its convenient financing and risk rating.This model is suitable for high-quality companies that have good daily operations and are experiencing difficulties for the time being.(2)The reason why Company A is in a financial dilemma is: heavy asset operation mode,industrial cycle and debt service cycle do not match,and the strong cycle and overcapacity of coal industry.(3)The reason why Company A needs to implement debt-to-equity conversion is to help companies reduce their financial burden,and secondly,to help its parent Company B resolve the debt crisis.(4)The Company A itself is in full compliance with the requirements of the government and is the target company that is encouraged to convert debts into shares.(5)After the debt-to-equity swap was implemented,the asset-liability ratios of the three companies A,B and C have all declined significantly,exceeding the expectations before the implementation of the plan.