The Simple Analytics of Debt-Equity Swaps and Debt Forgiveness
42 Pages Posted: 15 Feb 2006
Date Written: March 29, 1988
This paper is concerned with debt-equity swaps in which foreign residents are a party to the exchange (i.e., it does not deal with flight capital), and with debt forgiveness. The seemingly unrelated issues of debt-equity swaps and debt forgiveness are jointly treated in this study, because debt forgiveness is in fact a special case of debt-equity swaps. Namely, it is a swap in which a positive amount of debt is exchanged for zero equity. For this reason these two problems have many common features.
JEL Classification: 433, 441
Suggested Citation: Suggested Citation