is a right to purchase equity at a pre-agreed price and a pre-agreed time (or subject to pre-agreed conditions).

In the long run, we're all dead. John Maynard Keynes

I'm with DoDo there. I thought the company was (or at least could be) insolvent when debts got greater than assets. If the shitpile is sold for equity, and in that case I will actually suppose it's sold for shares in the company, I thought that precisely that made it more solvent.
Like, ending with 450 of good assets and 50 in cash, against 475 in debts, with shares diluted by a 200% increase in capital.

I fail to see how that would make the bank more insolvent.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi