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
This would allow national authorities to order the sale of the business or part of the business without consulting shareholders, transfer shares or assets to a temporary bridge bank, create a bad bank' to absorb toxic assets or force a debt write-down or debt to equity swap. They will also be allowed to order the replacement of senior management, impose a temporary moratorium on the payment of claims or step in to maintain essential services, such as lending and payment systems (especially in the case of a large bank whose failure would affect the wider economy).
Resolution tools: sale of business, bridge bank, bad bank', debt write-down or debt to equity swap
Creditors will take over 70%-80% of the shares of PT Voksel Electric if a proposal to restructure its debt of Rp 338.2 billion is accepted under debt to equity swap scheme.
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.
IBRA has agreed to convert US$ 438 million of the company's debt to it into share under a debt to equity swap. Under the same method US$ 147 million of its debt to JIPIC were converted into share.