Trillion Debt To Equity Swap Is The Most Important News Of The Market This Week.

Just like 17 years ago, 1 trillion and 400 billion of debt to equity swap was directly promoted by Premier Zhu Rongji. This debt to equity swap is also "prime minister" of Premier Li Keqiang.

In March 16th, Premier Li said at the two sessions press conference that the high debt ratio of enterprises is an old problem. We must unswervingly develop multi-level capital markets, and we can gradually reduce the leverage ratio of enterprises through the way of market debt to equity swap.

Then, in March 24th, Premier Li stressed at the opening ceremony of the Boao forum that China will push forward the reform of omnidirectional regulation in the financial field, so that it will be more conducive to the development of multi-level capital markets. At the same time, it will explore how to use the market approach to carry out debt to equity swap and gradually reduce the leverage ratio of enterprises.

With the completion of the commercial bank law modification and the pfer of debt to equity shares, the A share market is likely to usher in a new round of reform of state-owned enterprises under the name of the reform of state-owned enterprises, which is constantly being excavated, and the stock price is constantly rising, and the news is true and false.

Prime Minister Lee's two speech revealed at least two levels of meaning: first, debt to equity swap is mainly to reduce the leverage ratio, to convert part of bank loans (indirect financing) into direct financing; two, the debt to equity swap will be marketed, which is to let participants in the capital market, that is, investors willing to pay the bill, instead of paying the money in the way of the Zhu Rongji era.

Why do we start trillions at this time?

There are three backgrounds: first, the sharp rise in the bad rate of banks. In 2015, the scale of non-performing loans in the banking sector has reached 1 trillion and 270 billion, an increase of 51% over the same period last year.

With the continuous improvement of the capacity policy, it is expected that the bad scale will further increase. The conservative estimate is that the new bad assets will exceed 500 billion every year.

Two, the task of economic pformation is arduous. The zombie enterprises have to quit, and employees and debts are the two major problems. This year, the central government has decided to allocate 100 billion yuan to solve the problem of resettlement of workers in the process of solving excess capacity and disposing of "zombie enterprises".

Three is the present.

Relatively low, the bank's bad debt into shares, this "share" to have room for growth.

There is a saying that "we should choose companies that have temporary difficulties and have certain business capabilities after debt restructuring.

In industry selection, we must first conform to the national industrial policy and at least eliminate backward production capacity.

Those enterprises that still have potential for development and even relatively high quality in Chaoyang industry have become the common choice of banks.

This is a completely assumed and idealistic book of thought, since it is "an enterprise with a certain ability to operate", or even "

In the relatively high quality enterprises, loans can be passed through extension and so on.

It is possible to change stocks if they are put to death and left behind.

2, the small cap shares, the smaller the plate, the bigger the stock price, the better the flexibility. The 2 is the habitual thinking of the A share market over the past 20 years. 3, junk stocks, the more rubbish there is, the possibility of restructuring and Phoenix Nirvana! This is totally different from the debt to equity swap of Zhu Rongji. When banks stripped off bad assets, they first had to go public in Hongkong and sell them to overseas investors, so they should first look for the large ones, and now they are going to sell them to the mainland investors, so they have to follow the ideas and habits of the A share market. In my opinion

Xianglong electric power industry, which has a history of debt to equity swap for more than 10 years, is the best example.

Xianglong electric industry, which was listed in 1996, became a rotten company in a few years. It was mortgaged by the about 80000000 shareholding of the large shareholder Wuhan Ge Hua group, and the Hubei branch of ICBC has a loan interest rate of about 150 million. Because of its inability to repay, it had no choice but to turn debt into equity in 2003, and became the largest shareholder holding more than 20% shares.

When the debt was pferred to the stock market, the stock price of Xianglong was only 3-4 yuan, while the actual conversion cost of the bank was less than 2 yuan (150 million /8000 shares).

Over the next few years, the stock price of Xianglong was up to 17 yuan, and Hubei ICBC also continued to reduce its holdings. Until August 2014, its shareholding was reduced to less than 5%, and the equity investment income gained was at least several hundred million.