Question

Bell Ltd. is going out of business. It needs to pay off all its liabilities before it closes for good. It wants to convert some debts to equity as then a need to pay those lenders would not arise. Which type of debt can be converted to equity?

Answer 1

Bonds should be the answer

Answer 2

This is called "convertible debt", or "convertible bonds"

Convertible debt can be converted to equity, or a piece of ownership in the company. It's worth noting that Bell Ltd will need to inform any buyers of convertible debt that it plans to go out of business, since this is a major piece of information for any creditors or would-be shareholders.