DEFINITION of 'Debt For Bond Swap'

A debt swap involving the exchange of a new bond issue for similar outstanding debt or vice versa. Debt for bond swap transactions are usually executed to take advantage of an interest rate change and/or for tax write-off purposes.

BREAKING DOWN 'Debt For Bond Swap'

When interest rates go up a company may decide that it is to their advantage to issue new bonds at a lower face value in order to retire current debt that carries a higher face value; the company can then take the loss as a tax deduction.

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    An interest rate swap involves the exchange of cash flows between two parties based on interest payments for a particular ... Read Answer >>
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    Learn how interest rate swaps are traded on the OTC and interbank markets, and how these swaps can be used to arbitrage different ... Read Answer >>
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