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LBO:
1. What is an LBO?
Cash Based acquisition funded by large amount of debt at varying interest
rates and with different kinds of debt structures.
i.
FCX-PD (a kind of LBO)
ii.
KKR-DG
iii.
KKR-RJR NABISCO
2. What
a.
b.
c.
d.
e.
f.
3. What
a.
b.
c.
d.
e.
f.
g.
h.
i.
Only by deleverage
EBITDA expansion
EBITDA expansion, multiple expansion , deleverage
Call transcripts
CFOs Presentation
Communication cost to capital markets
All these are done to improve the P/E expansion by improving perception
about the firm
CAPEX equals Depreciation only for firms that already have a lot of asset built-up
and is not technology oriented so does not need constant upgrade. Then all you
are left with is maintenance CAPEX which can be met with cash available. If you
have growth capex then you have to improve cash flows a lot. IF you only have
maintenance CAPEX to bother with then all you have to do is improve the
turnover to improve the free cash flows.
Term Premium:
Yield = base rate + term premium
Liquidity preference/ Expectations/ Preferred Habitat/ Segmentation Theory
DB research division
In-house research division
A trade in a direct fashion trading
Advising: a client; in-house trading desk monetise the idea or information
Information: Arbitrage relative value trades is nothing but finding out arbitrage
in the bond markets
Arbitrage is a short run phenomenon
Relative value trade: arbitrage derived from yield curve data
Boot strapping model
Cubic spline model
Affline model
NSE uses NS model: Nelson-Siegel Model (ZCYC): ZCYC Zero Coupon Yield
Curve