How Does a Debt/Equity Swap Work?

A debt/equity swap is a financial restructuring strategy where a company exchanges outstanding debt for equity in the business.

This can help a company reduce its debt burden and interest costs while giving creditors an ownership stake in lieu of cash repayments.

Creditors may agree to the swap if they believe the company has long-term growth potential.

An equity/debt swap is often used by companies aiming to restructure their capital by reducing shareholder equity.

A debt/equity swap reshapes a company's financial structure by converting liabilities into ownership.

Monitoring debt-to-income and D/E ratios helps ensure that borrowing remains manageable.

Leverage should enhance financial growth without creating excessive risk.

A financial advisor can help you decide when and how to use debt as part of your financial plan.