Debt-for-Equity Swaps

A debt-for-equity swap is a financial arrangement where a company exchanges its outstanding debt (money it owes) for equity (ownership shares in the company). This typically happens during financial distress when a company struggles to pay its debts. By converting debt into equity, the company reduces its liabilities and gives creditors a stake in its future success. This can improve the company’s balance sheet and allow it to invest in growth, while creditors may recover their investment through potential future profits instead of losing their money completely.