Since the advent of high yield financing in the US in the late 1980s and in Europe more recently, high yield has been a staple of most post-leveraged buyout balance sheets. Although market windows open and close, high yield notes have weathered various recessionary storms and continue to be an integral part of the arsenal of financial buyers for targets with a non-investment grade credit rating (BB+ or lower for Standard & Poor’s or Ba1 or lower for Moody’s) after the acquisition.
High yield: the devil is in the details
The use of high yield financing is a staple feature of leveraged buyouts, but participants in deals may not appreciate the need for precisely tailored covenants. Valerie Jacob, co-managing partner of Fried, Frank, Harris, Schriver & Jacobson, highlights the keys to investor protection.
