alleryStart learning →What can happen to an over-leveraged company in an LBO?
AIt receives large tax refunds
BInsolvency or a debt-to-equity swap
CIts debt disappears at once
DIts equity is fully guaranteed
Answer & Solution
Correct answer: B. Insolvency or a debt-to-equity swap
If cash flow cannot service the debt, insolvency or a swap giving lenders control follows.
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