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 ?
In the medium to long term, Beijing will have to use a mix of deleveraging strategies, including debt restructuring, genuine debt-equity swaps (not the ones that it is implementing) and write-offs through bankruptcy of zombie companies, and austerity measures by cutting local government borrowing and excess capacity to diffuse the danger of a debt-bomb explosion over time.
The fact that commercial banks are not allowed to hold shares in companies has also impeded deleveraging, as it prohibits the use of direct debt-equity swaps to reduce SOE debt.
The Fund s investments focus on rehabilitating operationally strong but financially distressed companies via restructuring, rescheduling, refinancing, debt-equity swaps, liquidity management.
Thankfully, there are innovative means available to that end (substitutional investments, debt-equity swaps, etc.
Second, there are out-of-court reorganisations, where a company and its advisers negotiate with banks and other creditors to agree to a reduction of debt, often in exchange for equity, known as debt-equity swaps.
Debt-equity swaps have also become popular, as has M & A, either by strategic buyers or financial buyers.
Debt-equity swaps is an ideal investment for Islamic banks, since it conforms to the Islamic banking philosophy.
Debtor attitudes: Debt-equity swaps are regarded as the most promising blueprint for restructuring.
Did firms undertake debt-equity swaps for an accounting paper profit or true financial gain?
These suggestions include case-by-case rescheduling, interest rate capitalisation schemes, debt-equity swaps, debt-nature swaps, debt-education swaps and even debt-AIDS swaps.
Government assets may be allocated price tags for the purpose of debt-equity swaps.
The practice of using debt-equity swaps or debt-debt swaps to reduce the debt overhang of developing countries has given rise to an active controversy.