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China's First Debt-to-Equity Company Set Up in Beijing
Approved by the State Council, Beijing Cement Factory Co. Ltd., China's first debt-to-equity company, was recently founded in Beijing.
In accordance with the five requirements set down by State Economic and Trade Commission and the People's Bank of China for debt-to-equity transfer, and supported by State Economic and Trade Commission, Beijing government and State Building Materials Industry Bureau, the Beijing Cement Factory, recommended by State Economic and Trade Commission and through the independent evaluation by its major creditor--China Cinda Asset Management Corporation, has formally set up a new debt-to-equity company, i.e., Beijing Cement Factory Co. Ltd., on the basis of assets evaluation, accounting appraisal, and the signing of a debt-to-equity agreement.
Beijing Cement Factory Co. Ltd. has 963 million yuan worth of registered capital, of which, 688 million yuan was contributed by China Cinda Asset Management Corporation, accounting for 71.4 percent of the total registered capital, and 275 million yuan was from Beijing Building Materials Group, 28.6 percent of the total. The newly-founded company will form its organizational set-up in accordance with the "Corporation Law of the People's Republic of China" and carry out standardized operation in compliance with the requirement for the establishment of a modern enterprise system.
After Beijing Cement Factory transferred debt into equity, it can reduce expenditure on interest payment by nearly 100 million yuan annually. The asset-liabilities ratio can drop from 80.5 percent to 31.7 percent, down by 48.8 percentage points. It can turn deficits into profits in the same year. Beginning from 2000, it will earn well over 15 million yuan in profits every year.
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