Leveraged Buyouts and Bond Credit Spreads

Peter Feldhütter*, Yael Eisenthal-Berkovitz, Vikrant Vig

*Corresponding author af dette arbejde

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

Abstrakt

Recent decades have witnessed several waves of buyout activity. We find leveraged buyouts (LBOs) to be a significant concern for bondholders by showing that a) intra-industry credit spreads increase upon an LBO announcement, b) yields on bonds without event risk covenants are, on average, 21 basis points higher than those on same-firm bonds with such covenants, and c) structural models calibrated to historical LBO events imply an impact of 18–21 basis points on 10-year credit spreads. The impact is strongest in expansion periods and for bonds with maturities of 10–20 years.
OriginalsprogEngelsk
TidsskriftJournal of Financial Economics
Vol/bind135
Udgave nummer3
Sider (fra-til)577-601
Antal sider25
ISSN0304-405X
DOI
StatusUdgivet - mar. 2020

Bibliografisk note

Available online July 19 2019

Emneord

  • Credit spreads
  • LBO risk
  • Structural models
  • Leveraged buyouts

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