debt-to-equity swap

A debt-to-equity swap is a financial agreement where a company’s creditors agree to cancel some or all of the owed debt in exchange for shares in the company. Essentially, instead of getting repaid in cash, creditors become partial owners. This process helps the company reduce its debt burden and improve financial stability, especially during financial difficulties. For creditors, it offers a chance to potentially benefit from the company’s future growth through ownership, rather than risking losing money if the company faces bankruptcy.