Leveraged Buyout (LBO)
An LBO is when a company uses considerable amounts of debt (leverage) to buy another company. The acquired company’s assets are sometimes used as collateral for the loans. The ratio is usually around 90% debt to 10% equity during an LBO. Because of the small amount of capital, the bonds created to fund this are usually very low quality or junk bonds. An LBO helps a company purchase another company without having to put up large amounts of capital.
Synonyms:
Leveraged Buyout, LBO