Definition of Highly leveraged transaction (HLT)

Highly leveraged transaction (HLT)

Bank loan to a highly leveraged firm.

Cash transaction

A transaction where exchange is immediate, as contrasted to a forward contract, which
calls for future delivery of an asset at an agreed-upon price.

Going-private transactions

Publicly owned stock in a firm is replaced with complete equity ownership by a
private group. The shares are delisted from stock exchanges and can no longer be purchased in the open
markets.

Intercompany transaction

transaction carried out between two units of the same corporation.

Leveraged beta

The beta of a leveraged required return; that is, the beta as adjusted for the degree of
leverage in the firm's capital structure.

Leveraged buyout (LBO)

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.

Leveraged equity

Stock in a firm that relies on financial leverage. Holders of leveraged equity face the
benefits and costs of using debt.

Leveraged lease

A lease arrangement under which the lessor borrows a large proportion of the funds needed
to purchase the asset and grants the lender a lien on the assets and a pledge of the lease payments to secure the
borrowing.

Leveraged portfolio

A portfolio that includes risky assets purchased with funds borrowed.

Leveraged required return

The required return on an investment when the investment is financed partially by debt.

Leveraged portfolio

A portfolio that includes risky assets purchased with funds borrowed.

Round-trip transactions costs

Costs of completing a transaction, including commissions, market impact
costs, and taxes.

Structured arbitrage transaction

A self-funding, self-hedged series of transactions that usually utilize
mortgage securities as the primary assets.

Taxable transaction

Any transaction that is not tax-free to the parties involved, such as a taxable acquisition.

Transaction exposure

Risk to a firm with known future cash flows in a foreign currency that arises from
possible changes in the exchange rate. Related:translation exposure.

Transactions costs

The time, effort, and money necessary, including such things as commission fees and the
cost of physically moving the asset from seller to buyer. Related: Round-trip transaction costs, Information
costs, search costs.

Transaction loan

A loan extended by a bank for a specific purpose. In contrast, lines of credit and revolving
credit agreements involve loans that can be used for various purposes.

Transaction demand (for money)

The need to accommodate a firm's expected cash transactions.

Transactions motive

A desire to hold cash for the purpose of conducting cash based transactions.

Unleveraged beta

The beta of an unleveraged required return (i.e. no debt) on an investment when the
investment is financed entirely by equity.

Unleveraged required return

The required return on an investment when the investment is financed entirely
by equity (i.e. no debt).

Transaction

The financial description of a business event.

Leveraged buyout

The purchase of one business entity by another, largely using borrowed
funds. The borrowings are typically paid off through the future cash flow of
the purchased entity.

Transaction

A business event that has a monetary impact on an entity’s financial statements,
and is recorded as an entry in its accounting records.

leveraged buyout (LBO)

Acquisition of the firm by a private group using substantial borrowed funds.

Realizable Revenue A revenue transaction where assets received in exchange for goods and

services are readily convertible into known amounts of cash or claims to cash.

Picking transaction

Withdrawing parts or subassemblies from stock in order to
manufacture subassemblies or finished products.

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