Defined
Leveraged finance is funding a company or business unit with more debt than would be considered normal for that company or industry. More-than-normal debt implies that the funding is riskier, and therefore more costly, than normal borrowing. As a result, levered finance is commonly employed to achieve a specific, often temporary, objective: to make an acquisition, to effect a buy-out, to repurchase shares or fund a one-time dividend, or to invest in a self-sustaining cash-generating asset.
Although different banks mean different things when they talk about leveraged finance, it generally includes two main products - leveraged loans and high-yield bonds. Leveraged loans, which are often defined as credits priced 150 basis points or more over the London interbank offered rate, are essentially loans with a high rate of interest to reflect a higher risk posed by the borrower. High-yield or junk bonds are those that are rated below "investment grade," i.e. less than triple-B.
Leveraged Recapitalizations
A technique whereby a company takes on significant additional debt with the purpose of either paying an extraordinary dividend or repurchasing shares, leaving the remaining shareholders with a continuing interest in a more financially-leveraged company. This is often used as a "shark repellant" to ward off a hostile takeover, or as an interim means of cashing in on the comapny's performance following a leveraged buyout.
Leveraged Asset-Based Finance
Leveraged asset-based finance entails raising debt capital for companies where the physical assets or a defined, contractual cash flow form the basis for highly levered non- or limited-recourse funding of assets or projects. Leasing, project financing and whole business securitization are examples of these techniques.
Leveraged finance, like other parts of structured finance, primarily involves identifying, analysing and solving risks. These risks can be arranged into the following groups:
Leveraged Finance Risks
* Credit risks are concerned with the business and its market. Financial risks which lie within the economy as a whole, for instance, interest rates, foreign exchange rates and tax rates.
* Structural risks are risks created by the actual provision of finance including legal, documentation and settlement risks.
* Liquidity risks are those associated with the inability of a leveraged company to refinance itseld in tight credit conditions
Source :
http://en.wikipedia.org/wiki/Leverage_%28finance%29
http://giddy.org/dbs/structured/LevFinarticle.htm
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Leveraged Finance
Leveraged Finance Defined
Healthcare Finance
Asset-Based Lending
Although different banks mean different things when they talk about leveraged finance, it generally includes two main products - leveraged loans and high-yield bonds. Leveraged loans, which are often defined as credits priced 150 basis points or more over the London interbank offered rate, are essentially loans with a high rate of interest to reflect a higher risk posed by the borrower. High-yield or junk bonds are those that are rated below "investment grade," i.e. less than triple-B.
Leveraged Recapitalizations
A technique whereby a company takes on significant additional debt with the purpose of either paying an extraordinary dividend or repurchasing shares, leaving the remaining shareholders with a continuing interest in a more financially-leveraged company. This is often used as a "shark repellant" to ward off a hostile takeover, or as an interim means of cashing in on the comapny's performance following a leveraged buyout.
Leveraged Asset-Based Finance
Leveraged asset-based finance entails raising debt capital for companies where the physical assets or a defined, contractual cash flow form the basis for highly levered non- or limited-recourse funding of assets or projects. Leasing, project financing and whole business securitization are examples of these techniques.
Leveraged finance, like other parts of structured finance, primarily involves identifying, analysing and solving risks. These risks can be arranged into the following groups:
Leveraged Finance Risks
* Credit risks are concerned with the business and its market. Financial risks which lie within the economy as a whole, for instance, interest rates, foreign exchange rates and tax rates.
* Structural risks are risks created by the actual provision of finance including legal, documentation and settlement risks.
* Liquidity risks are those associated with the inability of a leveraged company to refinance itseld in tight credit conditions
Source :
http://en.wikipedia.org/wiki/Leverage_%28finance%29
http://giddy.org/dbs/structured/LevFinarticle.htm
src="http://pagead2.googlesyndication.com/pagead/show_ads.js">
Leveraged Finance
Leveraged Finance Defined
Healthcare Finance
Asset-Based Lending
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