Premiums paid to LBO target firm shareholders often exceed 40%.
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High growth firms with high reinvestment requirements often make attractive LBO targets.
Typical LBO targets are in mature industries such as manufacturing, retailing, textiles, food processing, apparel, and soft drinks.
According to fraudulent conveyance laws, if a new company is found by the court to have been inadequately capitalized to remain viable, the lender could be stripped of its secured position in the assets of the company or its claims on the assets could be made subordinate to those of the general creditors.
Junk bonds are high-yield bonds either rated by the credit-rating agencies as below investment grade or not rated at all.