Purchase Solution

Highly leveraged Industries

Not what you're looking for?

Ask Custom Question

Are certain types of industries more likely to be highly leveraged than others?

Purchase this Solution
Solution Summary

The Solution discusses basic capital structure and answers the question: Are certain types of industries more likely to be highly leveraged than others?

Solution Preview

A Highly leveraged transaction is a bank loan to a highly leveraged company. HLTs can be thought of as similar to junk bonds as they both face default risk, but HLTs are more secure and have stronger debt covenants due to their structure. HLT guidelines are set out by the U.S. Office of the Comptroller of Currency, the Federal Reserve Board and the Federal Deposit Insurance Corporation.

For a loan to be classified as an HLT it must meet the following guidelines:

? loan financing used for buyouts, acquisitions and recapitalizations.
? loan financing which doubles the borrower's liabilities and results in a
leverage ratio greater than 50% or increase the leverage ratio higher than 75%.
? loan financing designated as an HLT by the ...

Purchase this Solution
Free BrainMass Quizzes
Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

View More Free Quizzes
Related BrainMass Solutions

  • Comparison of Debt-equity Ratios Between Industries

    What do you notice about the types of industries with respect to their average debt-equity ratios? Are certain types of industries more likely to be highly leveraged than others? What are some possible reasons for this observed segmentation?

  • firms that are highly leveraged

    279986 firms that are highly leveraged How do you explain the existence and success of firms that are highly leveraged? In fact, some have a capital structure that is 100% debt?

  • Corporate Debt Expansion

    A firm's capital structure can affect the value of the firm only if investors are willing to pay more or less for the leveraged highly indebted firm.

  • Leverage Buyouts

    The buyout group finances much of the acquisition with debt capital, leading the target to become a highly leveraged private company following the acquisition. a. What types of firms would make ideal candidates for LBOs? Why? b.

  • Multiple Choice

    c)There is a higher possibility of net income or net loss and therefore more risk than a highly leveraged firm. d)All of these answers are correct. 1.

  • Leverage and NPV

    Even if subsequently the project is highly leveraged, at the time of NPV calculation, no interest cost would have been assumed. The solution explains the effect of using debt on the NPV of a project

  • 1-Is a dollar worth more today than tomorrow? Why or why not

    What is the danger of being a highly leveraged organization?

  • Generic Strategy, and Grand Strategy

    References: (1) Competitive Strategy: Techniques for Analyzing Industries and Competitors Michael E.

  • Comparative Analysis of Profitability and Financial Leverage

    A higher debt ratio means that more of the company's assets are financed with debt and the firm is said to be more highly leveraged. Pepsi has a higher debt ratio than Coke which suggests that Pepsi is more financially leveraged than Coke.

View More Related Solutions