Case Study On Market-Oriented Debt-to-Equity Swaps Of China Shipbuilding Industry Co.,Ltd.

At present,the downward pressure on China’s economy is increasing,and the leverage ratio of the enterprise sector are high.In order to grasp the decision-making and deployment of key tasks of deleveraging and structural adjustment,the State Council promulgated the "opinions on actively and steadily reducing the leverage ratio of enterprises" and its annexes in October 2016,which symbolize the opening of the latest round of debt-to-equity swaps.After more than three years,Market-oriented debt-to-equity swaps has made some achievements.However,there are also problems in the current debt-to-equity market,such as more project contracts and less landing.China Shipbuilding Industry co.,Ltd adopted the "two-step" mode of first increasing capital and paying off debts to subsidiaries,and then issuing shares to replace equity by listed companies,which is the first company in the market to implement this mode.This case has certain reference significance.This paper hopes to conduct in-depth analysis on the key issues and core steps in this model,and get relevant experience and lessons for the later enterprises using debt-to-equity swaps to further promote the implementation of debt to equity swap.This paper combs the basic situation of the current market-oriented debt-to-equity swaps,and on this basis,analyzes the case.First,it combs the basic situation,implementation background and implementation process of all parties involved.Second,it deeply analyzes the risk and profit,valuation and pricing,and implementation effect of the case,summarizes the advantages and disadvantages of the model,and puts forward optimization suggestions and practice enlightenment.Through the research of this paper,the following conclusions are drawn:(1)the successful experience of this case can be applied to the enterprises that need to reduce leverage and get rid of financial difficulties;(2)China Shipbuilding Industry co.,Ltd.has successfully solved the problems of current market-oriented debt-to-equity swaps in valuation,trading and exit mode by adopting the "two-step" mode;(3)China Shipbuilding Industry co.,Ltd.has successfully implemented the debt-to-equity swaps,The goal of reducing leverage has been achieved,but the profitability and growth have not improved in the short term due to the impact of economic and industrial prosperity;(4)this market-oriented debt-to-equity swaps has the advantages of fast time effect,guaranteed exit,completing debt disposal by banks,meeting the requirementsof compliance operation,and there are also deficiencies such as the lack of subdivision pricing of debt rights,the risk of large fluctuation of issuance price,and the lack of debt financing constraints Point.The following implications for the future market-oriented debt-to-equity market:(1)the structure of debt package should be introduced and the market-oriented debt pricing should be carried out in different levels;in order to prevent the serious fluctuation of the issue price,an adjustment mechanism of the issue price can be set up;the financing restrictions can be stipulated to protect the interests of investors;(2)The goal of debt to equity swap is not only financing,but also intelligence.We should carefully choose the implementation object,implement one enterprise and one policy,adhere to the principle of legalization and marketization;We will promote innovative development and establish a long-term mechanism.