A Study On The Debt-to-equity Swap Of Enterprises From The Perspective Of Debt Negotiation

In recent years,the leverage ratio of non-financial enterprises in China is high,and the debt ratio of non-financial enterprises is at an absolute high level,especially the debt ratio of some SOEs and real estate enterprises far exceeds the international warning line of 90% leverage ratio in the corporate sector.Therefore,under the dual challenges of deleveraging and the new normal economic situation,local SOEs with heavy assets and high liabilities will face huge pressure to repay their debts.In order to maintain the rights and interests of creditors and to preserve jobs,local SOEs will carry out debt restructuring to inject fresh blood into the operation of state-owned assets,and then achieve financial improvement,effective disposal of non-performing assets,and continuation of business operations,so that state-owned resources can be optimally allocated,the debt crisis can be solved,local financial risks can be prevented,and social stability can be maintained.When an enterprise is in financial distress,how to determine the debt repayment mode and debt repayment ratio to balance the interests of multiple parties by shareholders and creditors and other stakeholders will become a key research issue in the promotion of debt conversion in China.In this paper,we study the case of Salt Lake Company,a state-owned enterprise in Qinghai Province,which chose bankruptcy and reorganization in the face of poor operation,and led by the Qinghai Provincial Government to negotiate with creditors through meetings and other means to fight against business difficulties.The case is studied through the process of debt negotiation with creditors through meetings led by the Qinghai provincial government.Based on the theory of responsibility dispersion and the theory of asset structure,this paper investigates that Salt Lake went into bankruptcy reorganization due to the deterioration of its asset structure as a result of its own blind investment and the failure of the bank as a debt supervisor to perform its debt supervision duties.The analysis focuses on how the bankruptcy reorganization of Salt Lake was carried out by using debt negotiation to choose the path of bankruptcy reorganization and the formulation of the reorganization plan.The starting points and contradictory points of interests among the main participants of this debt negotiation are carefully studied,as well as how the final agreement on the settlement plan was negotiated among the relevant stakeholders.This paper evaluates the effect of the implementation of the debt-to-equity conversion under this debt negotiation in terms of the recovery rate,financial performance and non-financial performance,and finds that the debt-to-equity conversion under this debt negotiation has effectively led to good overall financial performance of Salt Lake,improved the asset structure of Salt Lake,enhanced the operating capacity of Salt Lake,and laid a solid foundation for Salt Lake’s future development towards "new energy It has laid a solid financial foundation for Salt Lake to move towards the "new energy" blue ocean.Combining the "signaling"theory with the event study method to study the landmark event of the debt negotiation of Salt Lake,we found that the release of the restructuring plan of Salt Lake as the result of the completion of the debt negotiation did not quickly attract the enthusiasm of market investors,but after the release of the restructuring plan of Salt Lake,Salt Lake quickly implemented the relevant debt repayment matters,which made investors recognize the debt negotiation.However,after the launch of Salt Lake’s restructuring plan,investors recognized the result of the debt negotiation and believed that the debt-to-equity swap was not a negative act of "debt evasion",but a positive signal for the local government to consolidate the advantageous resources of enterprises and banks to save themselves.Finally,this article proposes some reference strategies for the debt to equity swap under this debt negotiation from the perspectives of enterprises,banks,and the government.It also points out the banking regulatory issues exposed by this debt to equity swap and the feasibility of resolving disputes through debt negotiation,in order to provide reference for the implementation of market-oriented debt to equity swap in the future.