A Case Research On Deleveraging Of Hangxiao Steel Structure

The problem of high leverage rate of Chinese enterprises has seriously affected the economic development of our country.After the 2008 economic crisis,in order to promote economic development and promote enterprises to leverage actively,many industries generally use debt financing to survive and develop,which makes many industries have a high leverage rate.As the pillar industry of China’s economy,the leverage rate of construction industry has been high in the past ten years.In 2016,the state promulgated the policy of supply-side reform to promote the sound development of China’s economic industry through capacity reduction,de-stocking,deleveraging cost reduction,improve underdeveloped areas.However,due to the special business model of the construction industry,it is difficult to promote the work of de-leveraging.The problem of high leverage in the construction industry has become a stubborn problem,which has seriously affected the development of the industry.Taking Hangxiao steel structure as an example,this paper firstly makes a comprehensive and detailed analysis of the changes in the leverage ratio of the enterprise from 2010 to 2017 through the methods of financial index analysis and comparative analysis,and finds that the leverage ratio of Hangxiao steel structure shows an overall trend of first rising and then falling within 7 years.Then,the causes of the high leverage of Hangxiao steel structure,the necessity and feasibility of deleveraging as well as the ways of deleveraging are studied in detail.Finally,the influence of deleveraging on the company’s enterprise value,capital structure,financial leverage effect and financial ability is analyzed.Through analysis and research,this paper believes that de-leverage can not be achieved overnight,but needs a long-term plan based on the actual situation of the enterprise.Before deleveraging,Hangxiao Steel Company has made a comprehensive analysis and planning on the company’s strategic deployment,mode innovation and core competitiveness;by constantly consolidating the growth of its main business while developing new technologies to optimize its product structure and increase gross interest rate and cash flow,the company’s profitability can be increased;by innovating its business model,it can be transformed into the integration of technology,product and service output.At the same time,we should constantly adjust and expandthe financing methods,adopt directional additional debt repayment,product upgrading to reduce the occupied funds,and issue convertible bonds to continuously reduce the enterprise’s asset-liability ratio,adjust the capital structure to reach the optimal state,and achieve steady de-leverage.On the one hand,this paper summarizes and analyses the experience and problems of Hangxiao Steel’s successful de-leveraging,and puts forward relevant suggestions.On the other hand,it has important significance in theory and reality for other enterprises to promote de-leveraging.