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Leveraged buy-out (LBO)

The acquisition of a controlling stake in one company by another using a large amount of borrowed money including bank loans and bonds. Leveraged buy-outs, which can end up being hostile takeovers, are often carried out by private investors who take a listed company private. These generally have a ratio of 90% debt to 10% equity and so the bonds issued are classed as junk or high yield. The assets of the target company are often used as collateral for the debt.

This definition is for general information purposes only