Case Study On The Market-Oriented Debt-for-Equity Swap Of Yuanxing Energy

With the slowdown of my country's macroeconomic growth and the transformation and upgrading of the industrial structure,the pressure on the real economy has increased,some enterprises have difficulty in operation,and the leverage ratio remains high,and debt defaults have occurred frequently.At the same time,banks have higher non-performing loan ratios and greater financial risks.In this context,market-oriented debt-to-equity swaps came into being.Different from the previous debt-to-equity swap,this debt-to-equity swap adheres to the principle of marketization,with the main purpose of solving corporate financial distress,improving corporate operating efficiency,and promoting corporate transformation and upgrading,taking into account the reduction of banks' non-performing loan ratio and the resolution of financial risks.Therefore,it was strongly promoted by national policies.However,in actual operation,the slow progress of private enterprise debt-to-equity swaps has become an urgent problem to be solved by market-oriented debt-to-equity swaps.This paper takes Yuanxing Energy,a successful representative of private enterprise debt-to-equity swap,as an example for analysis,summarizes its successful experience and shortcomings,and strives to provide a certain reference for subsequent debt-to-equity swap companies.In the relevant theories and current status of implementation,firstly,this article combs the relevant literature at home and abroad.Secondly,this article describes the differences between the two rounds of debt-to-equity swaps and the current status of market-oriented debt-to-equity swaps.It is found that this round of debt-to-equity swaps is still mainly carried out by state-owned enterprises.Although the number of private enterprises implementing debt-to-equity swaps is increasing,the overall proportion is still very small.Finally,this article summarizes the two major restrictions on private enterprises' participation in market-oriented debt-to-equity swaps.One is the limitation of private enterprises themselves,and the other is the limitation of the scope of debt-to-equity swaps.In the case introduction section,first of all,this article examines Yuanxing Energy's operating situation,financial situation and the overall background of the industry.I find that the industry in which Yuanxing Energy operates has developed well in recent years,and the company has three cores Competitiveness compared with similar enterprises.In the last two years before the implementation of market-oriented debt-to-equity swaps,its profitability and growth ability are good,but its financial risks are relatively high.Soit belongs to high-quality enterprises with temporary difficulties,and meets the conditions of current round of market-oriented debt-to-equity conversion screening targets.Then this article introduces the entire debt-to-equity swap program and specific processes,including the implementation of market-oriented debt-to-equity swap,funding sources,transaction targets,pricing mechanism,equity holding and withdrawal arrangements.In the case analysis part,first of all,this article analyzes the motivations from the external environment and the internal transaction parties.This paper finds that industry upgrade and transformation,policy encouragement and promotion are the external motivations for the implementation of this market-oriented debt-to-equity swap project.Resolving corporate financial risks and seeking strategic investors are internal drivers.Secondly,this paper deeply analyzes the rationality of Yuanxing Energy's choice of the issuing stocks for repaying loan's model,and the characteristics of its market-oriented debt-to-equity swap project,including the following five points,insurance asset management company's independent trading,the source of funds is the bank's RRR Funds,exit channel sets up gambling agreements,debts and equity come from different subsidiaries,pricing mechanism is more reasonable.Then,through the financial analysis method and the event research method,this paper focuses on the analysis of the impact of the debt-to-equity swap project on Yuanxing Energy,which is embodied in improving the company's financial situation,optimizing the corporate governance structure,and pushing the stock price closer to the company's intrinsic value.It also took into consideration the impact on implementing agencies and creditor banks,which was specifically reflected in enhancing the ability of creditor banks to withstand risks and implementing agencies to obtain equity investment income.Finally,this article reviews the entire market-oriented debt-to-equity swap project and finds that it has four shortcomings,which is specifically reflected in the bank's RRR cut without spurring the participation of social funds,the debt-to-equity swap plan lacks flexibility,lacks a later-stage debt restraint mechanism,and fails to eliminate the risks of poor company operations and market changes.In the conclusion and recommendations,I believes that Yuanxing Energy's market-oriented debt-to-equity swap project is generally successful,but not perfect.By summarizing the successful experience and shortcomings of Yuanxing Energy,this article puts forward relevant suggestions from three aspects.The first is the proposal to improve the competitiveness of private enterprises in market-oriented debt-to-equityswaps,it includes improving the information disclosure mechanism,implementing multi-strategies to promote private enterprise transformation and upgrading,reasonably increasing the supplementary terms of debt-to-equity swap.The second is the proposal to reduce the risk of implementing agency market-oriented debt-to-equity swaps,it includes building a comprehensive risk management system,training or introducing professionals,paying attention to the design of the follow-up debt restraint mechanism and shareholders' equity mechanism.The third is the proposal to strengthen government departments to promote the market-oriented debt-to-equity swap of private enterprises,it includes broadening the source of funds for market-oriented debt-to-equity swaps of private enterprises,diversifying exit channels for equity,and implementing supporting policies for debt-to-equity swaps.