What types of debt financing are commonly used in leveraged buyouts?
As regards the leveraged buyout (LBO) of a potential local target company, the Romanian/foreign company (purchaser) would generally finance the LBO through a loan, granted by a Romanian/foreign bank. Generally the debt incurred is secured against the assets of the business being purchased. Banks are generally willing to leverage up to 70% and seek 30% equity. Maturity of the loans granted for LBOs generally ranges between eight and 10 years. Another vehicle of debt financing in leveraged buyouts is the issuing of bonds with a highly attractive interest (junk bonds), although in Romania this corporate finance method rarely occurs. Mezzanine finance, a hybrid of debt and equity financing, is another possibility of business financing in Romania, although it is not yet popular among potential investors. This form of financing could further gain momentum, considering that foreign investment funds have shown interest in the Romanian market (for example, the Balkan Accession Fund specializes
