Debt/Equity Swap

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Debt/Equity Swap

A situation in which a debtor (which is a company) replaces the debt held by one or more creditors with a percentage of ownership in the company. A debt-equity swap often occurs if the company would otherwise be unable to repay the creditor(s) anything without going bankrupt. However, the swap may be a result of change from a debt-based to an equity-based capital structure. In either case, these swaps are often considered part of a company's attempt to restructure itself. Some debt agreements restrict the debtor's ability to force a debt-for-equity swap.
References in periodicals archive ?
Global Banking News-January 10, 2014--Creditors of collapsed Brazilian bank seek debt to equity swap
2 billion is accepted under debt to equity swap scheme.
The Committee does wish, as far as is practicable, to support the company in concluding its operational turnaround and proposed balance sheet restructuring, although the convertible bondholders also wish to share equitably in any upside arising from the proposed debt to equity swap.
He said around 25% of the debt will be settled with debt to equity swap, 10% will be bought back and the rest will be rescheduled.
Following completion of the debt to equity swap, and assuming all of the Notes are exchanged in the contemplated transaction, IFCO's debt will be reduced by EUR 216 million (the outstanding principal amount plus accrued interest) and equity will be increased by EUR 216 million.