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Definition of 'Debt/Equity Swap'
A refinancing deal in which a debt holder gets an equity position in exchange for cancellation of the debt.
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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.
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