Leveraged Finance
Leveraged 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 payment, or to invest in a self-sustaining cash-generating asset.
There are often different layers of finance involved in leveraged financing. These range from a senior secured bank loan or bond to a subordinated loan or bond. A large part of the role of leveraged financiers is to calculate how each type of finance should be raised in order to secure the deal. Leveraged finance is typically divided into leveraged and acquisition finance, leveraged recapitalizations and leveraged asset-based finance.
Leveraged and acquisition finance is the provision of bank loans and the issue of high yield bonds to fund acquisitions of companies or parts of companies by an existing internal management team (a management buy-out), an external management team (a management buy-in) or a third party (an acquisition). The Leveraged and Acquisition Finance technique is focused on structuring and executing debt financings for various types of leveraged transactions, such as financial sponsor leveraged buy-outs, corporate acquisition financings, debt refinancings and other restructuring activities.
Leveraged recapitalization is an instrument when 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 to ward off a hostile takeover, or as an interim means of cashing in on the company"s performance following a leveraged buyout.
Leveraged recapitalizations are commonly used by privately held companies as a means of refinancing, generally to provide cash to the shareholders while not requiring a total sale of the company. Debt (in the form of bonds) has some advantages over equity as a way of raising money, since it can have tax benefits and can enforce a cash discipline.
Leveraged asset-based finance entails raising debt capital for companies where the physical assets or defined, contractual cash flow form the basis for highly levered non- or limited-recourse funding of assets or projects.
Project financing, leasing and business securitization are examples of these techniques. Project financing is the long term financing of infrastructure and industrial projects based upon the projected cash flows of the project. By leasing, a company can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments.
Allied Asset provides assistance in leveraged finance and closely co-operates with leading world banking institutions that enables us to offer the best terms and conditions for a specific type of business project.
*Allied Asset Management does not carry out any activity which is subject to licensing.