equitization

Vocabulary Word

Definition

'Equitization' is when debt is converted into equity of a company or a firm. If you're a lender who hasn't been repaid, rather than lose your money, you might accept ownership shares of the business owing you money. It's a way to maneuver around financial obstacles.

Examples in Different Contexts

In tech start-ups, 'equitization' strategies can be explored to diversify ownership and infuse capital. A start-up founder might say, 'Considering equitization will allow us to integrate strategic investors, which can bolster our technological advancements and market reach.'

Practice Scenarios

Finance

Scenario:

We're seeing an increased number of delinquencies and defaults on the loans we issued. It's imperative we devise strategies to recover our funds.

Response:

Given the circumstances, perhaps we could look into equitizing some of the non-performing loans.

Economics

Scenario:

As the government looks towards liberalizing its economy, the role of state-owned enterprises will have to be redefined to stimulate growth and competition.

Response:

The government should probably consider the equitization of some state-owned enterprises to catalyze that process.