Glossary

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LBO

Leveraged buyout, the acquisition of a firm or business unit, typically in a mature industry, with a considerable amount of debt.

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Leveraged buyout fund

A fund, typically organised in a similar manner to a venture capital fund, specialising in leveraged buyout investments. Some of these funds also make venture capital investments.

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Loan capital

Loan capital ranks ahead of share capital for income and capital. Loans typically are entitled to interest and are usually, though not necessarily, repayable. Loans may be secured on the company's assets or may be unsecured. A secured loan will rank ahead of unsecured loans and certain other creditors of the company. A loan may be convertible into equity shares. Alternatively, it may have a warrant attached which gives the loan holder the option to subscribe for new equity shares on terms fixed in the warrant. They typically carry a higher rate of interest than bank term loans and rank behind the bank for payment of interest and repayment of capital.

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Lock-up

A provision in the underwriting agreement between an investment bank and existing shareholders that prohibits corporate insiders and private equity investors from selling at the time of the offering.