Leverage and Pricing of Debt in Lbos

Journal of integrated pay 18 (2012) 124137 Contents lists available at SciVerse ScienceDirect Journal of Corporate Finance journal homepage: www.elsevier.com/locate/jcorpfin leverage and price of debt in LBOs? Paolo Colla a,?, Filippo Ippolito b, Hannes F. Wagner a a b Bocconi University, Italy Barcelona tweak School of Economics, Universitat Pompeu Fabra, Catalonia?Spain article info Available online 9 November 2011 JEL classification: G30 G32 G34 abstract We show that the mental synthesis and pricing of debt in LBOs by and large depend on a single characteristic of the render firm, pre-LBO profitability. We find a substantiative relationship between pre-LBO profitability and line of work deal leverage that is reconciled with a impulsive trade-off surmisal of capital building in the presence of accommodation costs. We urge that the wide ordinate of debt tranches used in LBO pay can be folded into two important categories, sr. and junior debt, where the pricing of senior and junior debt depends on their sexual congress use and on bankruptcy risk. Our assure also suggests that senior lenders surfeit cheap credit during sultry buyout markets. © 2011 Elsevier B.V. each(prenominal) rights reserved.

Keywords: Leveraged buyout Senior and junior debt depot loans High-yield debt Private equity 1. Introduction The recent books on capital body structure argues that firms adjust leverage infrequently because of adjustments costs associated with changes in leverage. 1 Leary and Roberts (2005), Flannery and Rangan (2006), and Lemmon et al. (2008) show that objet dart firms dynamically rebalance their leverage to stymie within an optimal range, in the presence of frictions the adjustment towards the optimum is typically not immediate and firms mainly deviate from optimal leverage. turn on this idea and on the theories of dynamic capital structure (Fischer et al. (1989), Leland (1998), Goldstein et al. (2001)), Strebulaev (2007) argues that because cross-sectional...If you unavoidableness to get a ample essay, order it on our website: Ordercustompaper.com

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