what is a debt equity swap 
a debt equity swap is a transaction in which the obligations or debts of a company or individual are exchanged for something of value namely equity in the case of a publicly traded company this generally entails an exchange of bonds for stock the value of the stocks and bonds being exchanged is typically determined by the market at the time of the swap understanding debt equity swapsa debt equity swap is a refinancing deal in which a debt holder gets an equity position in exchange for the cancellation of the debt the swap is generally done to help a struggling company continue to operate the logic behind this is an insolvent company cannot pay its debts or improve its equity standing however sometimes a company may simply wish to take advantage of favorable market conditions covenants in the bond indenture may prevent a swap from happening without consent in cases of bankruptcy the debt holder does not have a choice about whether he wants to make the debt equity swap however in other cases he may have a choice in the matter to entice people into debt equity swaps businesses often offer advantageous trade ratios for example if the business offers a 1 1 swap ratio the bondholder receives stocks worth exactly the same amount as his bonds not a particularly advantageous trade however if the company offers a 1 2 ratio the bondholder receives stocks valued at twice as much as his bonds making the trade more enticing 