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I don't get it. Why would a bank loan billions to a company losing money, so they can acquire another company losing money? The bank takes all the risk for li
by grayfaced 6y ago
I don't get it. Why would a bank loan billions to a company losing money, so they can acquire another company losing money? The bank takes all the risk for little return. At what point should the bank just become an investor.
- jessaustin 6y agoWell probably the only "bank" involved was an investment bank. Typically they would issue bonds rather than taking out a mortgage. Some investors like the risk available with such corporate bonds. Although this may not be a LBO situation, selling junk bonds is often the way that PE firms steal everything from firms they "buy". I have no idea how the "all-stock" claims jive with selling bonds. I suppose the buyer could just issue more of its own stock, if the numbers don't add up. [EDIT:] This last maneuver seems more plausible if the buyer itself was previously a LBO target and the PE dudes haven't totally drained it yet.