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Far Eastern Reserve Bank: The Results of Corporate Deleveraging

SHUNTIAN — The Far Eastern Reserve Bank (FERB) has announced new policies aimed at curbing debt and to deleverage the corporate sector just last night as part of its wider deleveraging campaign to improve the financial health of the FEUSSR economy.

Previously, the Reserve Bank had employed a variety of techniques to minimise financial risks, such as standardising the country's credit rating agencies or imposing limits on bank lending to property developers. Initially targeted at property developers, the campaign gradually spread to cover various other sectors, prompting property developers and various firms to cut leverage, spin off non-core assets, and bolster balance sheets by raising equity for affiliates. The deleveraging process is occurring faster than market expectations, as many firms remain driven by a combination of intention to meet regulatory requirements, and are further incentivised due to the tightening of credit from borrowers. Companies that deleverage and cut risks down face less hurdles when negotiating with financial institutions, which is extremely desirable.

Most property developers showed the biggest improvement in the ratio of their cash to short-term debt, while the number of companies breaching the liquidity gauge shrank 64% from half a year earlier. This was done through cutbacks on land purchases, the extension of debt maturities, and cutting down on borrowings. However, there remain 30 major firms that continued to struggle with the ratio of liabilities and assets.

To furthermore cut down on debt, FERB has requested various steelmakers across the FEUSSR, such as Ansteel, to re-assess production levels to make steel products more profitable, prevent overproduction, and nurse the steelmaking industry away from a glut so it can become marketable once more. Similarly, it has asked heavy industry groups such as DSME and HHI to spin off unprofitable affiliates to consolidate its financial state.

^{OOC: https://finance.yahoo.com/news/evergrande-fails-china-three-red-210000891.html}