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Debt Equity Swaps

 
David Boneham of Deloitte describes the corporation tax treatment of debt equity swaps
 
In troubled debt restructurings lenders sometimes agree to accept an issue of shares by the borrower to discharge all or part of the outstanding debt. The subject of this article is the corporation tax treatment of such a debt equity swap where the lender is a bank that is otherwise unconnected with a corporate borrower and the swap is undertaken in the ordinary course of its banking business(see figure 1). Statutory references are to the Corporation Tax Act 2009 unless otherwise stated.
Figure 1: Typical debt equity swap
Debt Equity Swaps and the Loan Relationships...

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