An historical overview of the use of the debt-equity swap as a capital market response to the third world debt problem is presented. Conditions under which debt-equity swaps have been used successfully are noted, and the discount/subsidy aspect of the debt-equity swap structure is analyzed as the oritical component of this financing technique.;In addition, this document posits that the secondary market for third world loans transcends classic efficient market theory, as to risk-to-yield relationships reflected in trading levels, in order to recognize the utility value of third world loans as methods of conveying amended financial claims to investors. Linking of privatization and employee ownership with the debt-equity swap is also discussed as a future financing plan appropriate to third world countries.;Sixty-six professionals knowledgeable about debt-equity swaps were interviewed, including practitioners who structure such transactions, academics as commentators on this debt conversion process, national and international government officials as facilitators of the process, and bankers in their roles as originators of loans to third world countries and as managers of corporations who invest for their own account in third world enterprises through the debt-equity swap mechanism. A list of interviewees is available from the author. An extensive bibliography and listing of databases searched identifies subject sources.
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