Deal-for-equity swaps
In a debt-for-equity swap, some of a firm's debt is cancelled and lenders are given shares.
Firms basically have two sources of external finance: bank loans ('debt') and funds from shareholders ('equity'). In a debt-for-equity swap, some of a firm's debt is cancelled and lenders are given shares.
This is often a sign that a firm is in trouble- perhaps unable to make the cash needed to meet interest payments, or in breach of the debt-to-equity ratio specified by lenders and unable to raise extra capital via new bank loans, or from shareholders via a rights issue.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Lifetime ISA reform: Retirement option could be scrapped in overhaulA consultation on a product replacing the Lifetime ISA is set to be launched this year, and the option to use it to save for retirement is expected to be axed in the shake-up
-
HMRC stamp duty crackdown sees probes of property deals jump 88% – what to watch out forFrom bogus stamp duty refund claims to misleading the taxman about who owns a property, HMRC is increasing its scrutiny of stamp duty land tax reporting. Here’s how.
