No more rubber-stamp placements: the market gets tighter for corporate IOUs
Article Abstract:
Corporate financial activities prior to the stock market crash of Oct 1987 left American corporations with enormous debt levels. The distribution of this debt has shifted to risky junk bonds, subordinated debentures, subordinated notes with detachable warrants, convertible securities, and other highly leveraged instruments. A 1988 recession would make it difficult for many corporations to survive, much less borrow to pay debts or finance new ventures. Corporations that made conservative investments will still find ample opportunities to borrow, perhaps with increased use of swaps and options. The uncertain financing market for 1988 is stimulated primarily by junk bonds. Many businesses will have to postpone both business decisions and financing plans. Others will be completely squeezed out of the market.
Publication Name: Cashflow Magazine
Subject: Business
ISSN: 0196-6227
Year: 1988
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The ABCs of LBOs: a guide to the post-Crash buyout
Article Abstract:
Leveraged buyouts (LBOs) continue to be an important component in the mergers and acquisitions market after the stock market crash of Oct 1987. Acquisition prices are 15% to 20% lower than their peak, without pressure to generate cash flow for debt service by breaking up the acquired company. Sellers find LBOs an attractive means to sell a business or obtain capital. Lenders are cautious and tend to reduce the amount of loans and negotiate better terms after considering cash flow and tangible assets of a target. Buyers must invest more equity for reduced leverage. The elimination of tax benefits may reduce the feasibility of LBOs of industrial companies that have highly depreciated buildings and equipment.
Publication Name: Cashflow Magazine
Subject: Business
ISSN: 0196-6227
Year: 1988
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