Who is responsible for the debt in an Leverage buyout?
General Partners / Newco or the merged firm / Newco Management / Lenders and Debt holders / Limited Partners
Answer:
New Company or the merged firm will be
responsible for the debt in an Leverage Buyout.
A leveraged buyout (LBO) occurs when someone purchases a company
using almost entirely debt. The purchaser secures that debt with
the assets of the company they're acquiring and it (the company
being acquired) assumes that debt. Therefore, in the question, the
acquired company will be the new company and it will assume the
debt, hence, responsible for the debt in the leverage buyout.
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