LEVERAGED BUYOUT - LBO
Takeover or controlling interest of a company, using a significant amount of borrowed money, either bonds or loans, to meet the acquisition cost. Oftentimes, the assets of the company serve as collateral for the loans aside from the assets of the acquiring company. It lets the firms to create huge acquisitions without committing to a lot of capital. LBO has a usual ratio of 90% debt to 10% equity but because of the debt/equity ratio, these are not considered investment grade and referred to as junk bonds.
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