Review of Financial Studies Vol. 6 No. 4 1993
Bondholder Losses in Leveraged Buyouts
Abstract
Announcements of successful leveraged buyouts (LBOs) during January 1985 to April 1989 caused a significantly negative return on outstanding publicly traded nonconvertible bonds. Yet the average risk-adjusted debt holder losses are less than 7 percent of the average risk-adjusted equity holder gains. Bond losses are related to the pre-LBO rating, but only weakly to equity holder gains. We demonstrate that trader-quoted data from a major investment bank offers conclusions about the effects of LBOs on debt holders different from those drawn from commonly used matrix and exchange-based data (such as Standard & Poor’s Bond Guide data). This has important implications for event studies involving debt instruments.
- DOI
- 10.1093/rfs/6.4.959
- Volume
- 6
- Issue
- 4
- Pages
- 959-982
- Language
- en
- Sources
- openalex crossref