TY - JOUR T1 - Low-Cost Multinational Acquisition Financing Using<br/>Collateralized Corporate Obligations JF - The Journal of Private Equity SP - 21 LP - 32 DO - 10.3905/jpe.2011.14.4.021 VL - 14 IS - 4 AU - Jonathan Davis AU - Donald P. Samelson AU - Robert G. Schwebach AU - Ralph V. Switzer Y1 - 2011/08/31 UR - https://pm-research.com/content/14/4/21.abstract N2 - This article proposes an innovative financial transaction that employs a whole business securitization structure to create low-cost sources of acquisition financing. The transaction structure provides U.S. acquirers with a unique form of levered financing by creating a debt–equity hybrid security with option-like characteristics. The security, termed here a collateralized corporate obligation (CCO), creates low-cost capital that can be applied to finance the acquisition of operating assets from which payments on the securities are derived. The proposed transaction enables both public and private companies to structure leveraged transactions at lower rates than available through traditional forms of debt financing. Acquirer returns are enhanced through capital structure changes combined with mitigation of bankruptcy and agency costs. Similar transactions have been effected in the U.K. The feasibility of a CCO transaction is dependent on the ability to enhance creditor rights by shifting the administration of insolvency proceedings to creditor-friendly jurisdictions, such as the U.K. This article examines the financial, legal, accounting, and tax implications of the proposed transaction from a U.S. perspective.TOPICS: Private equity, fixed income and structured finance, legal and regulatory issues for structured finance, financial crises and financial market history ER -