Leveraged: Buyout

The "capital stack" in an LBO is often layered by risk and repayment priority:

: A hybrid of debt and equity that fills the gap between senior debt and equity. leveraged buyout

: The "leverage" comes from using a small amount of equity—typically provided by a financial sponsor like a private equity (PE) firm—and a large amount of debt. The "capital stack" in an LBO is often

: Secured by assets and paid first; carries the lowest interest rates. leveraged buyout

LBOs are defined by their unique capital structure and the use of the target company's own assets to facilitate the purchase.

: Often called "junk bonds," these are unsecured and carry higher interest rates due to increased risk.