| Leveraged
Buyout - LBO |
 |
A strategy involving the acquisition of another company using borrowed
money (bonds or loans). The acquiring company uses its own assets
as collateral for the loan in hopes that the future cash flows will
cover the loan payments. |
 |
There
is usually a ratio of 90% debt to 10% equity. Because of this high
debt/equity ratio, bonds are usually not investment grade and are
referred to as junk bonds.
|
|
|
|
|
Dictionary
