LEVERAGED BUY-OUT Definition

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LEVERAGED BUY-OUT (LBO) is a transaction used for taking a public corporation private, financed through the use of debt funds: bank loans and bonds. Because of the large amount of debt relative to equity in the new corporation, the bonds are typically rated below investment grade, properly referred to as high-yield bonds or junk bonds. Investors can participate in an LBO through either the purchase of the debt (i.e., purchase of the bonds or participation in the bank loan) or the purchase of equity through an LBO fund that specializes in such investments.

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ADEQUATE DISCLOSURE is sufficient information in footnotes, as well as financial statements, indicative of a firms financial status.

FLAG OF CONVENIENCE (FOC) involves the opportunistic registration of ships with national governments that do not impose or effectively administer agreed international standards regarding seaworthiness, safety and health, officer and crew competencies, and employment conditions. For the governments concerned FOC shipping is an easy way to make money. Registration comes at a price in return for turning a blind eye to maritime responsibility, decency and common sense. The classic FOC host has little to do legitimately with the sea and seafaring. For owners of FOC ships, often hidden in corporate mazes and having little to otherwise do with the registering authority, the device is a way of increasing profit margins or turning quick profits.

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