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Debt/Equity Swap

A refinancing deal in which a debt holder gets an equity position in exchange for cancellation of the debt. 

|||There are several reasons why a company may want to swap debt for equity. For example, a firm may be in financial trouble and a debt/equity swap could help avoid bankruptcy, or the company may want to change capital structure to take advantage of current stock valuation.Covenants in the bond indenture may prevent a swap from happening without consent. 


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