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The key to the success of the interpretation of the "Debt --- debt-equity swap

Author: ZhouGePing From: www.yourpaper.net Posted: 2007-11-19 06:20:28 Read:
[Summary] because of the history, policy or legal reasons, the majority of non-performing assets of China's state-owned commercial bank loans from state-owned enterprises. The particularity of this bank-enterprise relationship of the form of ownership of the asset management company (AMC) are most likely to be state-owned. AMC government functions and behavior patterns to determine their viability should not have. Corporate, asset management companies and banks are state-owned, debt-equity swap and no transfer of ownership in the sense of a real market economy. Debt-equity swap as debt restructuring means a delay contradictions and the risk of outbreak of real-time emergency measures put forward again in the positive sense, but it is the key to success lies in the possibility of this as an opportunity, the birth of a new system of running a state-owned benign : effectively regulate corporate governance system, completely changing the business management mechanism.

, Debt and financial asset management companies

(A) the so-called debt-equity swap, is actually the corporate bank debt owed converted into equity, creditors become shareholders of the enterprise, and enterprises by the debtor company become shareholders. Debt to equity in three ways:
1 direct bank debt into equity of the bank.
2 bank debt will be sold to a third party (such as AMC), a third party and then the sum of debt converted to equity.
3. Banks to equity to the AMC, managed by the AMC, bank dividends and dividends from the AMC at.

The question is whether banks can direct holdings, which countries are taking a cautious approach in practice is also inconsistent: Japan, Germany, banks can invest Industry, the United Kingdom and the United States can not, but in the United States bankruptcy law also allows the bank to corporate debt will be converted to equity in the companies in trouble, but the bank can not hold long-term, it should be for a limited time for sale. Of the reason why legislation to prohibit the direct holdings of commercial banks, there are two reasons to worry about: First, the shareholding banks and enterprises mutual cover excessive bank assistance to enterprises, and enterprises that die (final loss still countries); Second, once Swap of Debt is not activated, the event of a liquidation of the enterprise, if a bank holds debt can be priority for repayment, and the equity only last repayment, bank losses are greater. We tend to direct management by the bank equity, the non-performing assets into a "better" option, the remaining non-performing assets by the AMC processing. Rationale: 1.AMC surviving (reason see later), you can not manage equity; "good" non-performing assets may be changed for the better bank investment profitable, and AMC is an independent legal entity, its profits with the state-owned The bank association is not high; bank customers need their own relationship, in order to gain a foothold in the future of banking competition in. In view of this China's four state-owned commercial banks set up their own financial asset management company (separate legal entities) specializes in the operation of the non-performing financial assets, bank debt into equity of the asset management company.

(B) The asset management company is most likely is a national all. Specific methods through the establishment of asset management companies to solve the problem of bad assets of banks non-performing loans and assets transferred from the bank to the asset management company. In theory, the company can be owned by the state, private or subsidized. Regardless of its structural features, the company has a clear mandate, that is, first of all non-performing loans into assets, then these assets into easy sales of assets, and the last to sell. Particularity forms of ownership of the asset management companies are most likely to be state all reasons: 1. Country special bank-enterprise relationship or the formation of bad assets of banks in China to deal with these non-performing assets responsibility ought to be borne by the Government. The formation of a large number of non-performing assets of China's banking industry is the result of a combination of factors, which for historical reasons, there are institutional reasons, as well as the impact of policy and legal changes. Institutional funds under the traditional planned economy system supply system and fiscal reform, "Bo Gaidai formed between banks and enterprises dependent mechanism, so that the precipitation of a large number of loans of state-owned banks in the state-owned enterprises, sluggish, bad credit assets generated historical reasons; From a policy perspective, government behavior between banks and enterprises offside too much, especially the excessive intervention of the local government, state-owned commercial banks operating mechanism exists in name only, resulting in credit funds financial, capital; From a legal perspective , on the one hand, the legal system is not perfect, China's "People's Bank of China Law, the Law on Commercial Banks, Insurance Law, Negotiable Instruments Law and other major financial promulgation and implementation of the law until 1995, before the state-owned commercial banks policy-related business and commercial business, regardless of credit loans, secured loans less issued many policy loans, and now basically become non-performing loans, in connection with the credit system is closely related to the laws and regulations (such as "Trust Law" policy of the Banking Act, the Financial Supervision Act, the Social Security Act and the Implementing Rules of the Financial Law) has yet to be introduced, a very imperfect and norms of the financial market, to increase the credit risk of commercial banks. On the other hand, due to government intervention, many laws and regulations have not been effectively implement. For example: the provisions of the Law on Commercial Banks, Bank of independent operation rights are not fully implemented, so that commercial banks can not control credit risk, insolvency or exist only in enterprise, the bank is not only difficult to prosecute the application of its bankruptcy, so that has become the bad debts of banks loans only long-term unpaid debts, even had to continue additional loans to survive, there are irregularities, for example, companies use bankruptcy law to escape bank debt, and have resulted in a large number of non-performing credit assets. A large number of non-performing assets (plus the four state-owned commercial banks to be allocated by the National Development Bank, the total non-performing assets of up to 1.2 trillion) transferred to asset management companies in the short term, this difficult step to find a private investor to have such The asset management company; 3.AMC restructuring of non-performing assets with the sale of the operations in question highly integrated high-tech professional is not suitable for private investment operation. Deal with banks' bad credit assets AMC operation difficulties: (1) conversion loans, which is the most common method for AMC, can be obtained ownership of the collateral; (2) bankruptcy liquidation, which may recover some money last expediency, but because of the the statutory bankruptcy proceedings usually result in the loss of a great amount of value; (3) the reorganization of assets, asset management companies can sell some of the secondary part of the assets, reorganize and reduce their employees, so the other part of the more effective to operate. Looking at the foreign experience, financial asset management companies operating the most effective approach is relatively independent organization of the working group to deal with every business, an independent person in charge of coordinating the work of each group, for example, in the industrial, service industry, real estate industry and other areas, both economists, legal scholars, and industrial and real estate experts, so be conducive to centralized elite force, the integrated use of various resources, all broken up, and improve efficiency. Obviously, these acts of private investment is difficult to get involved.



(C) AMC government functions and behavior patterns to determine their viability should not have. To U.S. settled practice of hosting companies in order to draw. Settle the hosting company itself was established (August 1989) is explicitly designated as a temporary agency, its purpose is specifically designed to solve the problems of the savings and loan associations. In fact, from August 1989 to establish since settled hosting company in just five years and more time to complete its historic mission to shut down at the end of 1995. Reasons: first, settle the hosting company believes that as government agencies do not have the expertise in financial operations and asset management, not enough talent, and secondly, the behavior of the government agencies is not suitable for the pursuit of profit maximization, once again, the government The institutions involved in economic activities, may also cause distortions in the market behavior. Such judgments of the United States to settle the hosting company to a large extent also applies to China. We should not help the state-owned enterprise profitability, so that the non-performing asset value as the main task of the asset management company. A more realistic guiding ideology is the asset management company as a temporary, transitional institutions, the main task is to clean up and recover debts, waiting for an opportunity to market conditions, to find buyers, and the disposal of non-performing assets as soon as possible. To do so may lose some asset value or reduce the chance of loss of commercial operation, but because the government does not have the ability to insist on trying to make the asset value, but may further increase the loss. At the same time, the government as the arbiter of the market activity, itself involved in market activities, is likely to lead to distortions of the market behavior. Schedule: asset management companies in China Bank Name Company registered capital (billion) capital sources Construction Bank Cinda Asset Management Corporation 100 financial allocations and Commercial Bank of China Huarong Asset Management company 100 financial allocation 100 financial allocation of the Agricultural Bank of Great Wall Asset Management Company Bank of China Orient Asset Management Corporation 100 financial allocation (Source: Capital Market magazine 1999 9 64)
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