Research On The Business Model Of Market-oriented Debt-equity Swap And Its Effect On Enterprises

Marketization of debt to equity swap highlights the principle of "marketization",that is,the implementing agency of debt to equity swap and the target company conduct reasonable negotiation and pricing on the basis of effective evaluation of enterprise value,reflecting the marketing mechanism of transactions.In addition,the market-oriented debt to equity swap also emphasizes corporate governance,that is,after becoming a shareholder of the target company,the implementing agency of debt to equity swap will generally appoint directors or supervisors to participate in corporate governance and optimize the corporate governance structure.The market-oriented debt to equity swap can effectively reduce the leverage ratio of the enterprise,reduce the financial burdens of the enterprise,and enable the enterprise to pack light,thus helping the enterprise to tide over the temporary difficulties,improve the cash flow situation,optimize the capital structure,and further bring new opportunities for the future strategic upgrading and development of the enterprise.The landmark event of the launch of this round of market-oriented debt to equity swap was the issue of the guiding opinions on market-oriented bank debt to equity swap by the general office of the State Council in 2016.At this time,a large number of enterprises in China have high leverage ratios and are facing a severe liquidity crisis,which brings great hidden threats to the operation of enterprises.In this context,the five major state-owned banks took the lead in setting up the five major financial asset investment companies as the implementation agencies of market-oriented debt to equity swap.By the end of the second quarter of 2021,the scale of China’s new round of market-oriented debt to equity swap had reached 1.7 trillion yuan,with a large market influence.This paper takes Hubei Xingfa Chemical Industry Group Co.,Ltd.(hereinafter referred to as Xingfa group)as the case object,and studies the case of its market-oriented debt to equity swap by using the methods of literature research and case study.First of all,this paper combines the literature related to the market-oriented debt to equity swap at home and abroad,summarises the main viewpoints and makes comments.Second,this paper analyzes the business model,transaction structure and core terms of various types of market-oriented debt to equity swap in the market and combines cases to comprehensively analyze the market-oriented debt to equity swap.Based on the above analysis,through the actual case of market-oriented debt to equity swap,this paper analyzes the implementation motivation of Xingfa group company’s market-oriented debt to equity swap and the financial and non-financial impact on the enterprise after the implementation.It is believed that the market-oriented debt to equity swap has significantly improved the company’s debt paying ability,reduced the financial burden of the enterprise,and brought new opportunities for development for the enterprise.Finally,the paper draws a conclusion and gives corresponding opinions.It is very important for cyclical enterprises to control their responsibilities;The market-oriented debt to equity swap is also a better way to reduce the debt ratio of enterprises,and it is worth trying for enterprises with high debt ratio at present but good development space in the future.In addition,on the basis of market-oriented negotiation,it is necessary to select suitable high-quality companies as the objects of market-oriented debt to equity swap,and provide reasonable exit paths to bring win-win results for enterprises and market-oriented debt to equity swap implementing agencies.