Debt-for-Equity Swap

A debt-for-equity swap is a financial arrangement where a company exchanges its outstanding debt (what it owes) for equity (ownership shares). This often occurs when a company is struggling to pay its debts. By converting debt into equity, the company reduces its financial burden while giving creditors a stake in the business. This can provide relief and a chance for recovery, but it also dilutes the ownership percentage of existing shareholders. In essence, it’s a way to restructure finances, helping companies focus on growth while addressing financial obligations.