5 ms·
It's just like a mortgage. Even though it's you buying the house, it's in a way the house that ends up owning the mortgage (in many jurisdictions, you can walk
by mseebach 9y ago
It's just like a mortgage. Even though it's you buying the house, it's in a way the house that ends up owning the mortgage (in many jurisdictions, you can walk away from the house and mortgage, and the bank had no leverage against your person, they can only repossess the house).
- ssharp 9y agoI was trying to explain what a leveraged buyout was and why a company like Toys R Us had so much debt on its books. After trying to talk through it, I used the mortgage analogy and it made a lot more sense.
- beojan 9y agoNo, there the house is collateral. In this case, instead of the lender simply taking over the acquired company, the acquired company declares bankruptcy and is liquidated.
- mseebach 9y agoBut a bank will just hand over money for an LBO without taking collateral?
- yrro 9y ago(FYI this isn't the case in at least the UK...)