A Case Study On The Apllicationa Of “fund Mode”Debt-Equity Swaps

In recent years,due to the adjustment of the macroeconomic cycle,many enterprises in China,especially state-owned enterprises,have problems such as high leverage,high debt risk and low profitability.Under the background of supply-side reform,the State Council formally issued the "Opinions of the State Council on Actively and Steadly Reducing the Leverage Ratio of Enterprises" and "Guiding Opinions on Market-Oriented Debt-Equity Swaps" on October 10,2016,which proposing various policy plan eases the pressure on corporate debt,and takes "marketization" and "legalization" as the basic principles to further refine and clarify the overall thinking of debt-equity swaps.Since the market-oriented debt-equity swaps were officially opened,relevant departments in China have actively introduced supporting documents on debt-equity swaps to promote the smooth implementation.However,this round of debt-equity swaps has many projects but few landing projects.Only in practice,it's constantly explored to be realistic.Only after the implementation of the debt-equity swaps mode can promote the smooth implementation of debt-equity swaps project,can we implement the goal of reducing the leverage of the national supply-side reform.From the perspective of the implementation mode of debt-equity swaps,this paper introduces the definition of debt-equity swaps firstly,and compares the differences between the two rounds of debt-equity swaps.Then this paper compares the differences between the three main modes of “Direct Mode”,“Indirect Mode” and“Fund Mode” based on the introduction of the concept and characteristics of market-oriented debt-equity swaps.Taking the case analysis method,the paper studies the case of Shandong Energy Group's debt-equity swaps.From the perspective of enterprises and commercial banks,it analyzes the impact and risk brought by the“Fund Mode”,and the advantages and applicability of “Fund Mode” compared with other implementation modes.It's concluded that the “Fund Mode” is more flexible than other implementation modes.The choice of the target companies is better,the funds are raised more easily,the creditor pricing is more standardized,the execution is more efficient and the risks are lower.The “Fund Mode”has fully played the role of resource allocation.If the corresponding risks can be controlled,it can bring positive impacts to both banks and enterprises to a certain extent,such as helping enterprises reduce debt pressure and optimize corporate governance structure.To accelerate the transformation and development of enterprises.Promote integrated bankingoperations,expand market share,and improve asset quality.Enterprises adopting“Fund Mode” make full use of this opportunity to focus on developing high-quality industries,improve profitability,improve corporate governance,and establish a modern corporate system to help achieve the ultimate goal of debt-equity swaps.However,it should be noted that in the process of debt-equity swaps,enterprises still face the risks of actual operation and the risk of equity exit.Banks also face unfavorable factors such as coordinated risk,information asymmetry risk,capital constraint risk,and risk of participation in management.It needs to be continuously improved in the process of promoting debt-equity swaps in the future.Moreover,the “Fund Mode” is difficult to apply to the debt-equity swaps of bad debts.In the process of exiting,it's easy to form "clear stocks" and it's also a problem to be considered when choosing the implementation mode of debt-equity swaps.