LBO Financing Sources
Hi, I'm a bit confused about the typical funding sources for LBOs and was hoping someone could clarify a few points.
From what I’ve read, it’s often said that bank financing makes up the largest part of LBO funding. But what kind of financing exactly? Many sources mention that banks usually don't issue Term Loan A (TLA) facilities for LBOs because they are considered too risky. On the other hand, Term Loan B (TLB) facilities are said to be primarily provided by institutional investors rather than banks.
So, what kind of term loans are banks actually providing in LBOs (I am assuming not only revolvers)? I've also read that the majority of loans in LBOs given out by banks are now "covenant-lite." But aren't covenant-lite loans effectively TLBs?
I'm a bit lost here — any clarification would be really appreciated!
Thanks a lot!
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