An arrangement by which a transaction is undertaken to take a public corporation private. Debt such as bank bonds and loans are used for this purpose. Owing to the large proportion of debt as compared to equity in the new entity, the bonds issued are typically below investment grade. These are also called junk bonds or high-yield bonds. Investors participate in such a buyout by purchasing equity through LBO funds specializing in such investments or purchasing the debt in the form of bonds or sharing in the bank loan.
