Debt/Equity Swap

A refinancing deal in which a debt holder gets an equity position in exchange for cancellation of the debt. 



|||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.