Debt-for-equity swap
Creditors exchange debt claims for ownership in a restructuring. It names the mechanic and says nothing about how the creditor came to hold the debt.
Debt-for-equity swap in round numbers
Hypothetical: a negotiated restructuring cancels US$40m of debt and allocates creditors all post-reorganization shares, cancelling old equity. The 100% allocation is an assumption of this plan, not a result of dividing dollar claims by an asserted equity value. Other plans can allocate shares to additional stakeholders.
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| Measure | Assumption |
|---|---|
| Debt extinguished | US$40m |
| Shares allocated to creditors | All post-reorganization shares |
| Creditor ownership under this plan | 100%; assumed allocation |
| Equity fair value | Not established by debt face amount |
Terms Related to Debt-for-equity swap
Loan-to-own · Credit bid · Fulcrum security · Absolute priority rule · Chapter 11 bankruptcy · All of the glossary