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Leveraged BuyoutA strategy involving the acquisition of another company using borrowed money (bonds or loans). The acquiring company uses its own assets as collateral for the loan in hopes that the future cash flows will cover the loan payments. Leveraged buyouts use high financial leverage ratio of about 90% debt to 10% equity. This high debt to equity ratio makes the bonds non investment grade, or junk bonds, due to the high risk of default.
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