Debt for equity swap

A debt-for-equity swap, also known as a debt-for-shares exchange, is a financial restructuring whereby outstanding liabilities are converted into equity. This reduces the company's debt burden and grants the former creditor an equity interest.

This structure is particularly relevant for companies in financial distress or undergoing restructuring, as it strengthens the balance sheet and improves the prospects of a successful turnaround. Creditors often accept a lower nominal value in exchange for future profit potential.

In Dutch practice, such swaps frequently occur in bankruptcy compositions or acquisitions in which banks or bondholders contribute their claims as share capital.