Analysis Of The Causes Of Sale And Leaseback Financing Of Shandong Iron And Steel And Its Economic Effects

The steel industry is a basic industry closely related to many industries,and it is a thermometer for the prosperity of the country’s macro economy.As we all know,2015 was a period of cold winter for the steel industry,and the steel industry showed signs of recovery in the past three years after the trough period.Due to the characteristics of the industry,iron and steel enterprises have many large-scale production equipment,resulting in inefficient use of funds and a huge demand for funds.In 2015,the country implemented supply-side reforms.In order to implement the policy of reducing production capacity and deleveraging,the state tightened the credit policy for the steel industry,and steel companies generally fell into the dilemma of blocking financing channels.In order to survive,companies strive to optimize the industrial structure,increase technical reform and upgrade efforts,diversify product categories,make products more differentiated,and promote the industry’s transformation towards refinement and high added value.Therefore,the demand for new and efficient financing models by steel companies is very urgent.The financial leasing industry came into being,and the sale-leaseback transaction model has become the new preferred financing method for most companies to revitalize assets,ease temporary funding pressures,and enhance their hematopoietic capabilities.It is not difficult to find that the sale and leaseback is actually similar to the mortgage business.The actual ownership and operating rights of the assets sold have not changed,and they are essentially a means of financing.This method can not only reduce the financing cost of enterprises to a certain extent,solve the problem of financing difficulties,but also play a role in optimizing the allocation of resources.Compared with bank loans,equity financing and other financing methods,the financial leasing method has a lower threshold and simpler procedures,so it is very popular among listed companies.Generally speaking,the objects of sale and leaseback are large fixed assets such as factory buildings and equipment.Sale and leaseback was originally an emerging financing method,but if supervision is not in place,it is easy for companies to use the sale and leaseback method to reach connected transactions with related parties to manipulate performance.The sale and leaseback will also cause the company to bear heavy financing costs and bring risks to the company.After reading a lot of literature,it is found that foreign scholars’ theories on sale and leaseback mostly start from the aspects of transaction cost,debt substitution,andtaxation.This article uses a case analysis method to analyze the motivations for enterprises to adopt the sale and leaseback business one by one,and further analyzes the sales and leaseback to Shandong Iron and Steel Co.,Ltd.from several dimensions such as profitability,debt structure,cash flow status and enterprise development ability.Impact,further analysis of the risks that the sale and leaseback method will bring to the enterprise,and then provide reasonable suggestions for the healthy development of the financial leasing industry.This article is divided into five chapters to elaborate on the case.The introduction part of Chapter 1 first introduces the development trend of the global leasing industry from the research background,then combs the relevant literature theories and introduces the research methods and ideas of this article.The second chapter is a theoretical overview,which introduces the basic concepts related to financial leasing in detail,analyzes the development status of financial leasing in China from the macro level,and finally elaborates the relevant theories of after-sale leaseback financing.The third chapter is the key chapter of this article.The author introduces the basic situation of Shandong Iron and Steel,details the development status of the iron and steel industry,the financial status of the company before and after the sale and leaseback financing,and analyzes the motivation of Shandong Steel to adopt the sale and leaseback.Based on the analysis of the financing motivation,Chapter 4 analyzes the economic effects of the sale and leaseback financing one by one,and comprehensively evaluates from multiple dimensions such as cash flow,profitability,debt structure and development capacity.Finally,Chapter 5 is the conclusion and enlightenment of the case study in this article.After summarizing the unique advantages of the sale and leaseback,we give suggestions from the lessee,the lessor and the government.Through the discussion in this article,in order to deepen the enterprise’s understanding of the sale and leaseback business model,and contribute a little to the improvement of the lease system.