Debt/Equity Swap

What Does Debt/Equity Swap Mean?
A refinancing deal in which a debt holder gets an equity position in exchange for cancellation of the debt.

Investopedia explains Debt/Equity Swap
There are several reasons why a company may want to swap debt for equity. For example, a firm may be in financial trouble and a debt/equity swap could help avoid bankruptcy, or the company may want to change capital structure to take advantage of current stock valuation.

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

Filed Under: Bonds, Fixed Income

Related Terms

Bankruptcy
Capital Structure
Covenant
Debt
Equity
Equity Swap
Indenture
Swap
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What is a debt/equity swap?

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