from https://en.wikipedia.org/wiki/Recapitalization Leveraged...

from https://en.wikipedia.org/wiki/Recapitalization

Leveraged Recapitalization[edit]

One example of recapitalization is a leveraged recapitalization, wherein the company issues bonds to raise money, and then buys back its own shares. Usually, current shareholders retain control. The reasons for this sort of recapitalization include:

• Desire of current shareholders to partially exit the investment
• Providing support of falling share price
• Disciplining the company that has excessive cash
• Protection from a hostile takeover
• Rebalancing positions within a holding company
• Help to improve the stock of the company during a time of poor economic conditions^[1]

Leveraged Buyout[edit]

Another example is a leveraged buyout, essentially a leveraged recapitalization initiated by an outside party. Usually, incumbent equityholders cede control. The reasons for this transaction may include:

• Getting control over the company via a friendly or hostile takeover
• Disciplining the company with excessive cash
• Creating shareholder value via gradual debt repayment

Nationalization[edit]

Another example is a nationalization, wherein the nation in which the company is headquartered buys sufficient shares of the company to obtain a controlling interest. Usually, incumbent equityholders lose control. The reasons for nationalization may include:

• Saving a very valuable company from bankruptcy
• Confiscation of assets
• Executing the eminent domain right