Grainger plc's debt-for-equity-swap

Here's how debt-for-equity-swaps work in real life: 

Grainger plc is a property company, so like banks, its balance sheet is much more important that its profit and loss account. They have told the holders of their 3.625% Convertible Bonds due 2014, that they can repay them 35p in the £1 and give them 8p worth of new shares as well, as a consolation prize*.

This doesn't look very attractive, but what's the alternative? The company's properties are worth what they are worth; and those properties are owned, in economic terms, by the shareholders and bondholders. So if bondholder insist on being repaid £1 in the £1, the company wouldn't be able to repay all the bonds in full anyway.

And, if this works for relatively humble property companies, why wouldn't it work for banks? Why do banks get £37 billion chucked at them?

* Via Jack C at HPC.