An investment of 2 billion yuan ($290.13 million) was put in a debt-to-equity swap program launched by the Shanxi branch of China Construction Bank (CCB) and Shanxi Coking Coal Group on May 15, marking the conclusion of the first deal for a market-oriented debt-to-equity swap program in Shanxi.
According to the agreement signed between the bank and company, CCB provides the company with two funds worth 25 billion yuan in two phases –– 15 billion yuan and then later, 10 billion yuan.
The deal made on May 15 belongs to the first fund which is set to lower the economic leverage of Shanxi Coking Coal Group. The debt ratio of the company will reduce by 4.5 percentage points once CCB provides 15 billion yuan during the first funding phase. In addition, the company is likely to save 152 million yuan in financial expenses each year.
The market-oriented debt-to-equity swap has been a vital support for the supply-side structural reform of companies in China. Shanxi Coking Coal Group will optimize its debt structure and improve efficiency of capital utilization through the swap, strengthening investors’ confidence in the company’s performance in the bond market.
