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 ?
The Detroit-based automaker has proposed to invest $2.8 billion in the Korea unit but demanded the state-run KDB, which is the second-largest shareholder with a 17-percent stake, participate in its debt-to-equity swap plan.
Donnet said that the firm was not looking to increase its holdings in Italian banks after becoming the second biggest shareholder in bailed out lender, Monte dei Paschi di Siena, through a debt-to-equity swap.
To avoid defaulting, Sri Lanka agreed to a debt-to-equity swap with China.
A debt-to-equity swap would increase risk in banks' portfolios.
As part of the debt-to-equity swap, BES will place 294m new ordinary shares.
Swiss car component manufacturer iQ Power (ETR:IQPB) said today it has acquired a 36.86% stake in Slovenian battery manufacturer Akubat for an undisclosed sum, in a debt-to-equity swap deal that makes it the largest shareholder in the firm.
Earlier Wednesday, GM said it has failed to secure the consent of enough holders of GM bonds for its debt-to-equity swap plan.
Lenders took the reins of South Korea's fourth-largest vehicle maker last year through a pounds 561 million debt-to-equity swap that rescued it from collapse.
The government announced a bailout plan for DSME last week, under which the KDB and Export-Import Bank of Korea (Eximbank) will provide 2.9 trillion won of loans on the condition the company's creditors and bondholders agree to a 2.9 trillion won debt-to-equity swap and a 900 billion won debt rescheduling.
Chinese state-owned banks have started to establish their own asset management arms to conduct debt-to-equity swap business for their peers.
The shareholders will also consider a EUR5m (USD6.9m) debt-to-equity swap of MKB Romexterra's arrears to its controlling shareholder, Hungary-based bank MKB.
The government last week announced a bailout plan for DSME, under which the KDB and Eximbank provide 2.9 trillion won of loans on condition the company's creditors and bondholders agree to a 2.9 trillion won debt-to-equity swap and a 900 billion won debt rescheduling.