Question was posed to me earlier this week. How could an LBO happen without a bank? Could this happen through seller financing resulting in the structuring of a leveraged loan by the sponsor? How would this play out in practice?
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Could be that. Also could be some combination of direct lenders, PE firm using their own capital markets team in lieu of a lev fin team, having an affiliated credit fund, putting in bridge financing in the form of a first-out loan, etc.
You can go direct to institutional/private placement investors without relying on a banks balance sheet
Seller financing doesn't really make any sense (unless you're talking about a staple from the sellers Bank) because you would literally be loaning from the proceeds of the sale which defeats the whole purpose
Depends on the type of business but you could also securitize the future cashflows/receivables of the business
Second point is very wrong. The seller could be happy to loan you funds and clip a coupon on the portion of the proceeds they give to the buyer as debt.
The syndicated loan market would be my guess as another alternative route, as the the members of the syndicate don’t have to be banks, could be hedge funds , pensions, etc.
Yes but in this case, the act of syndication would fall on the sponsor no?
Maybe. Certain direct lenders can assemble their own syndicates.
club deal
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