Controlling Financial Distress Costs in Leveraged Buyouts with Financial Innovations

Tim C. Opler

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Corporate Finance and Governance Corporate Insolvency and Governance Private Equity and Venture Capital

Abstract

Leveraged buyouts have often been funded in ways which appear to reduce the risk and cost of financial distress. Leveraged buyout financing methods include the use of specialist sponsors, strip financing, covenants which require that excess cash flows be paid to debtholders, and debt provisions which allow deferral of interest payments in periods of financial distress.

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1999ILLIQUIDITY RISK, PROJECT CHARACTERISTICS, AND THE OPTIMAL MATURITY OF CORPORATE DEBT 2008Economic Consequences of Private Equity Investments on the German Stock Market 2010Wealth effects of private equity investments on the German stock market

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