Case Study Of "Two-Step" Market-Oriented Debt-to-Equity Swap

At present,China’s macroeconomic growth is slowing down,and many enterprises are facing huge debt pressure and high leverage,and they are facing a serious financial crisis.In order to get out of this financial predicament,enterprises keep borrowing externally,which in turn aggravates their short-term debt burden and traps them in a vicious circle.In this context,in order to help high-quality enterprises to better reduce their leverage,reduce financial risks and promote good social development,the state started to coordinate the planning of a new round of debt-to-equity swaps.In 2016,the State Council issued guidance on market-based debt-to-equity swaps,followed by relevant documents from both the CBRC and the NDRC to guide the new round of debt-to-equity swaps from a policy perspective,creating a favorable policy atmosphere for the next round of debt-to-equity swaps The promulgation of these documents also marked the official opening of market-based debt-to-equity swaps.The most important feature of this round of debt-to-equity transfer is marketization,which is manifested in four aspects: marketization of implementation object,marketization of transaction pricing,marketization of fund raising and marketization of exit channel.As a leading enterprise in the aviation equipment industry,AECC has good development prospect,but due to the influence of industry characteristics,the leverage ratio of the enterprise is high and the pressure of short-term debt service is high,which seriously affects the sustainable development of the enterprise.Therefore,AECC and 7 implementing agencies jointly implemented the debt-to-equity swap.This debt-to-equity swap is the first application of the "two-step" model in aerospace enterprises,which provides a reference for more strategic enterprises of the same type.Taking the "two-step" market-based debt-to-equity conversion of AECC as an example,this paper analyzes the motivation of its debt-to-equity conversion from three aspects: the state,the industry and itself,describes the operation process of AECC debt-to-equity conversion,and discusses the application of the "two-step" model in the company in the light of the existing debt-to-equity conversion operation model and the successful experience of relevant cases.The effect of the "two-step" model in the company’s debt-to-equity conversion is analyzed and sorted out.From the perspective of financial indicators,the debt-to-equity conversion has effectively controlled the debt scale,reduced the gearing ratio,improved the capital structure of the company,increased the short-term and long-term debt servicing capacity,and freed the company from the existing financial difficulties.From the perspective of growth,the debt-to-equity swap has optimized the development indicators to different degrees,enhanced the development capacity of enterprises,and injected new vitality into the sustainable development of enterprises.