Series 79 practice questioneasyLeveraged Buyouts
Which of the following is typically the largest source of financing in a traditional leveraged buyout (LBO)?
- ASenior secured debt✓ Correct answer
- BSponsor equity
- CMezzanine financing
- DSeller notes
Explanation
Why A — Senior secured debt
Senior secured debt usually constitutes the majority of LBO financing, as it offers lower cost and greater availability. The trap is to overstate the role of equity or mezzanine funding, which are usually smaller portions of the capital structure.
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