The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

LBO sponsors look to ABS financing solutions

A growing number of large leveraged acquisitions are being refinanced in the corporate securitization market. Sponsors are seizing on the competitive pricing compared to traditional leveraged loans to squeeze more leverage and higher values into their bids. It’s a growth market, but the technique only works for certain companies Louise Bowman reports.

The conduit financing approach

WHAT DO BAA, Thames Water, London City Airport and Associated British Ports have in common? They have all recently been sold or are in the process of being sold in leveraged acquisitions that are expected to be refinanced in the corporate securitization market. As such they can form an orderly queue behind a list of household names that have found securitization a cheap and increasingly flexible option to refinance expensive acquisition lending. But although there has been a steady stream of private buyout-linked trade receivables deals for many years, large public ABS exits from private equity-backed LBOs have always been rare. That could be set to change.

Any potential buyer of an asset has always had to find the lowest price, but the classic private equity space has traditionally been sub-investment grade – turnaround situations that are not really financeable in the capital markets. But for buyouts of cash-stable, established businesses, it is now a different story. Heralding the trend was the Hertz LBO refinancing completed at the end of 2005. The $4.3 billion deal won several awards (including Euromoney’s structured credit deal of the year for 2005) and really woke the market up to the cost-of-capital savings that securitization can deliver to an LBO.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree