why use debt equity swaps 
debt equity swaps can offer debt holders equity because the business does not want to or cannot pay the face value of the bonds it has issued to delay repayment it offers stock instead in other cases businesses have to maintain certain debt equity ratios and invite debt holders to swap their debts for equity if the company helps to adjust that balance these debt equity ratios are often part of financing requirements imposed by lenders in other cases businesses use debt equity swaps as part of their bankruptcy restructuring debt equity and bankruptcyif a company decides to declare bankruptcy it has a choice between chapter 7 and chapter 11 under chapter 7 all of the business s debts are eliminated and the business no longer operates under chapter 11 the business continues its operations while restructuring its finances in many cases chapter 11 reorganization cancels the company s existing equity shares it then reissues new shares to the debt holders and the bondholders and creditors become the new shareholders in the company debt equity swaps vs equity debt swapsan equity debt swap is the opposite of a debt equity swap instead of trading debt for equity shareholders swap equity for debt essentially they exchange stocks for bonds generally equity debt swaps are conducted in order to facilitate smooth mergers or restructuring in a company example of a debt equity swapsuppose company abc has a 100 million debt that it is unable to service the company offers 25 percent ownership to its two debtors in exchange for writing off the entire debt amount this is a debt for equity swap in which the company has exchanged its debt holdings for equity ownership by two lenders 