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ARTICLE · 06 AUGUST 2026

Debt-to-Equity Swap: Opportunities And Risks

Mayer Brown
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Debt-to-equity swaps offer distressed companies a path to financial recovery by converting creditor receivables into equity, but they carry significant valuation risks that can expose new shareholders to unexpected liabilities. This analysis examines the legal framework governing these complex restructuring instruments in Germany, including insolvency plan proceedings and StaRUG restructuring procedures. Understanding the critical risk factors and implementation strategies is essential for creditors, distre

GermanyInsolvency/Bankruptcy/Re-Structuring
Marco Wilhelm
Marco Wilhelm
Tina Hoffmann
Tina Hoffmann
Malte Richter
Malte Richter
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I. WHY THIS TOPIC IS IMPORTANT

Debt-to-equity swaps are effective but also complex restructuring instruments: creditors convert their receivables against a company into equity and receive shares in the company in return.

A debt-to-equity swap enables companies to gain financial flexibility and time for further restructuring measures during periods of economic uncertainty or an ongoing crisis by reducing or eliminating balance sheet over-indebtedness as well as existing interest and principal payment obligations. For creditors, a debt-to-equity swap presents an opportunity to avoid the total loss of impaired receivables and to participate as shareholders in any (future) restructuring success. Specialized distressed-debt investors also frequently employ debt-to-equity swaps to acquire control of, or ownership interests in, a distressed company through a “loan-to-own” strategy.

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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