Case Study On The Transformation Of Market-based Debts Of Nangang Steel Under The Suplly Side Reform

As the domestic economic slowdown entered the "new economic normal",the state introduced a supply-side structural reform to address problems such as overcapacity and high leverage.Market-oriented debt-to-equity swaps have been proposed as a means and tool for supply-side reform.This tool is different from the past policy-based debt-to-equity swaps.It emphasizes the characteristics of its marketization and rule of law.Market-based debt-to-equity swaps provide financing and financial support to companies with temporary difficulties,high debt ratios,and transitional pains.The successful experience of CNPC’s market-based debt-to-equity swap can provide reference and development for other domestic enterprises.The article takes Nangang Steel as the research object and studies the motivation,process and economic effects of its debt-to-equity swap.The main drivers of the share-based debt-to-equity swap of Nangang are supply-side reform,the downturn in the steel industry,strategic transformation needs,excessive debt pressure and limited refinancing methods.In the implementation process of debt-to-equity swaps,Nangang has done a good job in ex-post management.First of all,to do adequate information communication and due diligence;to continuously optimize the cooperation plan,coordination mechanism and exit mechanism of debt-to-equity swaps;Good communication during the implementation process.Finally,it evaluates the effect of the implementation of debt-to-equity swaps.The evaluation results show that the share-transfer of Nangang has reached the expected target and has good economic and social benefits.The experience summary of the market-oriented debt-to-equity swap of Nangang can provide some inspiration for the traditional heavy industry enterprises in the dilemma:in the market-oriented debt-to-equity swap,it is necessary to promote the agreement between the two parties,and how to choose the implementing agency and how to determine the conversion target and "Debt-to-equity swap scheme;how to cooperate,how to coordinate the interests of both parties and how to withdraw.Market-based debt-to-equity swaps can help companies reduce leverage,but companies cannot slack off their management and strategic development.Behind the conversion,there are risks such as "soft constraints" and "rigid redemption" of exit arrangements.