Investopedia

Continue to Site »

Debt/Equity Swap

Filed Under » , , ,
Dictionary Says

Definition of 'Debt/Equity Swap'

A transaction in which the obligations (debts) of a company or individual are exchanged for something of value (equity). In the case of a publicly-traded company, this would generally entail an exchange of bonds for stock. The value of the stocks and bonds being exchanged are typically determined by the market at the time of the swap.
Investopedia Says

Investopedia explains 'Debt/Equity Swap'

A debt/equity swap is a refinancing deal in which a debtholder gets an equity position in exchange for cancellation of the debt. The swap is generally done to help a struggling company continue to operate (after all, an insolvent company can't pay its debts or improve its equity standing). However, sometimes a company may simply wish to take advantage of favorable market conditions.

Covenants in the bond indenture may prevent a swap from happening without consent.

Articles Of Interest

  1.

    An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.

  2. Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies, or the boot for investors. Find out how to tell the difference.

  3. Debt Reckoning

    Learn about debt ratios and how to use them to assess a company's financial health. You could save a lot of money!

  4. What is a debt/equity swap?

    Occasionally, a company will need to undergo some financial restructuring to better position itself for long term success. One possible way to achieve this goal is to issue a debt/equity or an ...

  5. Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?

  6. Why Your Pension Plan Has Sovereign Debt In It

    One type of security pensions tend to invest in is sovereign debt, or debt issued by a government.

  7. 6 Popular ETF Types For Your Portfolio

    Exchange traded funds are an extremely popular diversification tool that can protect your portfolio during troubled periods.

  8. Top 5 Budgeting Questions Answered

    You don't need a degree to understand your money, begin saving and pay down debt.

  9. Derivatives 101

    Learn how to use this type of investment as an alternative way to participate in the market.

  10. Asset Allocation: The First Step Toward Profit

    Understanding the different asset classes is an essential part of portfolio diversification.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Validation Period

    The amount of time necessary for the premium on an insurance policy to cover the commissions, the cost of investigation, medical exams and other expenses associated with the issuance of the policy.

  2. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.

  3. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  4. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  5. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  6. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.
Trading Center