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 ?
This can be a tricky issue, since it involves the dilemma as to whether foreign investment through debt equity swaps should enjoy and tax advantages that are either not open to other foreign investors or are not open to domestic investors.
iii) The Economist, Debt Equity Swaps in the 1990s: Swaps Under the Brady Umbrella : edited by Rubin, S.
ii) Business International, The Debt Equity Swap Handbook (New York, 1989)
(5.) Government of Mexico, Ministry of Finance, Debt Equity Swap Programmes: The Mexican Experience (UNCTC: New York, 1990)
Pradhan, 1991, "Debt Equity Swaps as Bond Conversions--Implications for Pricing", Journal of Banking and Finance, 15:29-41
Finally, we examine the issue of debt equity swaps as one of the best alternatives for surplus funds from Islamic banks.
The provision of debt equity swaps by the banks was appreciated by the board except that proper check and balance be in place to avoid abuse of this facility.
Compound these high interest rates over time, factor in the global recession, and the rest is history: Mexico's foreign debt today is over $100 billion despite the Brady Plan, "debt equity swaps," rescheduling, and other measures designed to reduce it.
Debt equity swaps involving conversion into equity and debt currency swaps that convert debt into local currency liabilities contribute if they attract additional foreign equity investment or bring about a return of flight capital.
Consider the case of a debt equity swap in which external government debt is exchanged by a claim on the capital stock owned by the domestic private sector.