Corporate acquisitions in which the acquiring company borrows most or all of the funds needed to finance the purchase. In a typical leveraged buyout, the buyer intends to repay the finance debt from funds gained from either the sale of assets owned by the acquired company or from profits earned by the acquired company. The high level of debt associated with almost all leveraged buyouts makes them relatively high-risk transactions. Thus, while some bank financing is often involved, some form of junior debt is needed. The junior debt in leveraged buyout may come from a lender willing to take a subordinate position. This type of financing is often called mezzanine financing. The funds needed for a leveraged buyout may also be raised by issuing junk bonds. American Banker Glossary
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( LBO)
A transaction used to take a public corporation private that is financed through debt such as bank loans and bonds. Because of the large amount of debt relative to equity in the new corporation, the bonds are typically rated below investment-grade , properly referred to as high-yield bonds or junk bonds. investors can participate in an LBO through either the purchase of the debt ( i.e., purchase of the bonds or participation in the bank loan) or the purchase of equity through an LBO fund that specializes in such investments. Bloomberg Financial Dictionary
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Purchase of a company by an institution using a high proportion of debt. A type of management buy-out ( MBO).
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(LBO)
The purchase of a company using borrowed funds, with the company's assets used as collateral (or as leverage) for the borrowing. The purchaser then repays the loans out of the acquired company's cash flow, or by selling its assets.
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leveraged buyout UK US noun [C] (ABBREVIATION LBO)
► FINANCE an occasion when a person or group uses borrowed money to buy a company: »
Should such an offer emerge it would be the largest leveraged buyout in UK corporate history.
Financial and business terms. 2012.