Deal-for-equity swaps

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.

The swap is bad news for shareholders because it creates extra shares that they are not entitled to buy, diluting their existing holding. But the alternative, a forced liquidation initiated by lenders, often leaves shareholders with nothing at all.

Paul Hodges: house prices could fall 50% in 'Great Unwinding'

Merryn Somerset Webb interviews Paul Hodges about deflation, the global economy's 'Great Unwinding', and how Britain's house prices could halve.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


28 January 1896: The world's first speeding ticket

119 years ago today, motorist Walter Arnold was caught tearing through Paddock Wood in Kent at a hair-raising 8mph, and became the first driver in the world to receive a speeding ticket.