Mega leveraged buy-out loans = risky mega investments for bank shareholder equity
Super banks -- safer brokering, leveraged buy-in IOU stock offerings -- then lending actual cash ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Of course, there are limitations with vendor financing, with a public company giving away stock for free almost, attached to IOUs. Greater shares outstanding, divides share of profits greater. Nevertheless, IOU stock offerings transform. Public company richer. Reduces risk, provides capital, and increases tangible book value.
Hypothetical stock financing theory, reduces failure. In general, if a group needs mega credit, to finance mega share purchases -- then the public company wanted, should provide the credit on paper. Pension consortium acting like, ocean of bank funds endless. Citibank deal-end-point equivalence rationale -- better to broker bce's IOU share offering -- then actually fronting 35 billion in actual cash to the Canadian pension bce lobby, for same thing.
The IOU stock leveraging loop%, economy-of-scale, special feature. Having shares in, and owing loans to, the same public company -- in one reality means that, part of loan, owned to that percentage of shares. Establishes a dynamic that leveraging more IOU stock, to total stock outstanding, adds to loop percentage.
For example, if leveraged IOU shares buy 10% of float, then IOU loop% is 9% Any new IOU share offerings, of similar payment structure, loop% grows for all leveraged IOU shareholders. If 50% of the outstanding shares are leveraged IOU shares, then 50 percent loop%. Though, costs twice as much to buy half of company, in IOU stock offering structure -- the loop% equalizes.
Unlike bce, pension plans do have problems with ditching real debt, as pension plans are capital reservoirs. The IOU share leveraged buy-in, give buyers -- pension plans -- the ability to determine and define the agreed, loan risk repayment/refund parameters -- felt as better path to reduce chapter 11 filing risks for pension plans, when engaging leverage.
Note, if debt can be borrowed, that one is not responsible to pay back, is like a bank robber ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ [Comes down to whether the chapter 11 melt down, and the resulting mega lawsuit -- whether a judgment can broaden loan repayment responsibilities, beyond the numbered company, listed borrowing the loan. (Must also consider a US judgment, Citibank will receive a favorable judgment.) Must clarify, whether investing in pool, also means co-signing for loan? Are repayment obligations attached to the pension funds' core? Stockcritic.]
~~~~~~~~~~~~~~~~~~~~~ (Asper's National Post today) "BCE Inc. and its advisors are considering an innovative move that could potentially widen the field of bidders for the company, sources say."
"Under the scenario, being discussed on a preliminary basis between BCE Nesbitt Burns, RBC Dominion Securities, and Goldman Sachs, some Canadian pension funds, keen to invest in the deal would be asked not to align with any one bidding group, but rather commit money to a common pool that purchaser could tap."
"This structure, referred to as an "equity stapled financing" would mirror a common practice employed in leveraged buyouts, where ready-made bank financing is offered to all bidders. But it is rare on the equity-financing side of such deals. As a result, the idea could face opposition from bidders. Including the pension plans."
"The conundrum facing the BCE board is how to hold a fair auction for the firm given the foreign-ownership constraints." [Conundrum for foreign buyers, helps maximizing foreign buyers' willingness to pay; ex. for 30 percent, pay 45 percent. BCE's media network influential.]
"Everything is very preliminary, and everything is being discussed, as a possibly,' said a source familiar with the situation. "This type of situation would be innovative and unique. But then, you're not dealing with the run-of-the-mill transaction."
[Let's have a leverage buy-in with BCE shareholder financing -- rather then a leverage buy-out with bank shareholder equity financing.]