Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/147742 
Year of Publication: 
2015
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 3 [Issue:] 1 [Publisher:] Taylor & Francis [Place:] Abingdon [Year:] 2015 [Pages:] 1-12
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
Private equity investors have traditionally used innovative financial methods in structuring their leveraged buyouts (LBO) deals. In recent years, they have frequently employed securitization to raise funds on the back of their acquisitions' operating assets. A distinctive feature of these transactions is that they aim to enhance the securitizing LBO's debt pay capacity through a set of structural enhancements including operating debt covenants. Operating covenants- supported by legal security arrangements-mitigate an LBO's financial and operating risks and improve its cash generation potential. We test this hypothesis by examining changes in the operating income of Hertz LBO. The results show that, within the operating framework adopted by Hertz LBO, securitization improved the transaction's debt service capacity.
Subjects: 
leveraged buyouts
securitization
operating management covenants
Hertz
JEL: 
G32
G34
L20
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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