leveraged-recapitalization-method

Vocabulary Word

Definition

'Leveraged recapitalization method' is a strategy used by companies to change their capital structure by borrowing money to repurchase outstanding stock. This increases the company's debt but decreases its equity.

Examples in Different Contexts

In corporate restructuring, 'leveraged recapitalization method' involves a company taking on significant debt to buy back its own shares or pay dividends, aiming to optimize its capital structure. A restructuring advisor might explain, 'Leveraged recapitalization method can be a strategic move to increase shareholder value by altering the debt-equity mix.'

Practice Scenarios

Consulting

Scenario:

Our client is struggling to thwart a potential hostile takeover. They are considering various strategic defenses and need our recommendations.

Response:

I'd recommend proposing the leveraged recapitalization method as a financial maneuver. The increased debt could serve to discourage potential acquirers.

Investing

Scenario:

Given the market volatility, we need to reevaluate the risk profile of our portfolio investments. It appears that ABC Corp has recently initiated a significant financial restructuring.

Response:

Noted. We should study the risks associated with ABC Corp's leveraged recapitalization method and potential impact on their long-term solvency.