The Case Analysis On Debt-to-Equity Swap Of Huarong Energy

Debt-to-equity swaps,that is,debt-to-equity swaps,are effective ways to reduce the non-performing loan ratio of commercial banks and the excessive leverage ratio in the economic system.This measure has been implemented in many countries.In 1999,China implemented a policy-based debt-to-equity swap to acquire the bank's non-performing assets through a state-funded financial asset management company,transforming the previous bank-enterprise's claims into equity between financial asset management companies and companies.The financial asset management company has actually become a shareholder in the company stage,exercising the rights of shareholders in accordance with the law and participating in major decisions of the company.After the business situation improves,the funds will be recovered through asset restructuring,listing,transfer or company repurchase.With the deepening of economic system reform,the structural adjustment of the supply side has become extremely important and has become an important part of economic system reform.The supply-side structural reforms mainly include five aspects: de-capacity,de-stocking,de-leveraging,cost reduction and short-boarding.Among them,debt-to-equity swaps play an important role in de-capacity,deleveraging and cost reduction.At present,the Chinese economy faces three stages of superposition,namely,the growth rate shift period,the structural adjustment pain period,the digestive period of the previous stimulus policy,the increase in the bank's non-performing loan ratio and the decline in corporate solvency.Therefore,debt-to-equity swap is a compromise strategy for long-term economic development goals and short-term “three to one and one subsidy” goals.At the same time,the problem of rising absolute debt level and leverage ratio of enterprises makes enterprises lack solvency,which leads to an increase in bank credit risk,which causes a vicious circle of economic development and even causes systemic risks of banks.At present,the prominent problem that restricts China's economic development is that effective supply cannot meet demand,and the conditions for stimulating economic development are gradually improved.However,China's productivity level has been in a state of moderate to low growth.Traditional heavy industries such assteel,coal,and infrastructure construction have overcapacity.In contrast,high-tech industries have been slow to develop,resulting in a serious imbalance in the economic structure.In order to continue to maintain a healthy and stable growth of the national economy and promote economic restructuring,the state has proposed a market-oriented debt-to-equity swap strategy.The implementation of the debt-to-equity swap policy is to coordinate the supply-side structural adjustment,promote balanced economic development,and release new economic growth points to promote the stable and healthy development of the national economy.This paper chooses to study the issue of China's private enterprise debt-to-equity swap.Firstly,it introduces the macroeconomic background of China's debt-to-equity swap,summarizes the implementation of domestic and foreign debt-to-equity swaps,and selects Huarong Energy,a key construction project in Jiangsu Province,to make a specific analysis.Explain the debt-to-equity swap agreement signed between Huarong Energy and its creditor banks and suppliers.Through the financial data research before and after the implementation of debt-to-equity swap,Huarong Energy summarized the aspects of the enterprise and the banking industry after the implementation of the debt-to-equity swap.The impact,finally combined with the case and China's national conditions,pointed out the shortcomings of China's debt-to-equity swaps at the current stage and correspondingly proposed some improvement methods,which provide some ideas for the development of debt-to-equity swaps in China,which has certain practical significance.