Debt/Equity Swap
A refinancing deal in which a debt holder gets an equity position in exchange for cancellation of the debt.
Investopedia Commentary
There are several reasons why a company may want to swap debt for equity. For example, a firm may be in financial trouble and a debt/equity swap could help avoid bankruptcy, or the company may want to change capital structure to take advantage of current stock valuation.
Covenants in the bond indenture may prevent a swap from happening without consent.
Related Links
When Companies Borrow Money
Debt Reckoning
Bond Basics Tutorial
See also: Bankruptcy, Capital Structure, Covenant, Debt, Equity, Indenture, Swap
Also spelled: Debt-equity swap, debt equity swap