5. Financing

Q3 (Debt-Equity Swap (DES))

What kind of procedure is a debt-equity swap (DES)?

A DES is a scheme under which a creditor of a company subscribes for new shares, and then, in lieu of paying cash for the shares, the creditor contributes its claim to the company as payment for the shares. The result is as if the creditor’s claim (debt) is exchanged (swapped) for the shares (equity), hence the name.

(Posted: January 27, 2012)