Improvement And Legal Difficulties Of Leveraged Buyouts Financing

The essence of the leveraged buy-out financing is leveraged acquisitions, whichuses the debt capital as the main financing tools. The target company assets areguaranteed, in order to raise the debt capital, just like the real estate mortgage loans.According to the report of the Eighteenth National Congress of the Communist Partyof China:“we should deepen the reform of the financial system，improve thepromoting macroeconomic stability, support development of the real economy of themodern financial system and develop a multi-level capital market," Leveraged buyoutis an important dirving force of economic development. Central government attachesgreat importance to the scientific development, the innovation drive, and optimizingthe leveraged buy-out financing way for innovation drive has a huge role. In thecapital market, capital flows quickly and the competition is iferce. Just like a proverbsaid, nothing can be accomplished without norms or standards. If there is no lawprovides rules to the capital market, capital market inevitably fall into disorder andchaos. Review of China’s capital market growth path, through the capital marketdevelopment i"n developed countries, we can get a revelation: the law is strong andthe market is strong, the law is weak, the market is weak. The law system of theleveraged buy-out ifnancing in our country have no systematic, many parts are legalvacuum, which is very detrimental to leveraged buy-out financing. Legal processapproach of LBO financing is seriously lagging behind.This article has a deep research on the main three ways of LBO Financing, which islegal system of preferred stock、high-yield bonds, and private equity fund. The articlestudies the law predicament of the three ways in our country, and the relevant legal inAmerica, and the solutions to the three financing ways in our country.The thesis is divided into four chapters. First chapLer introduces the concept and characteristics of leveraged buy-outfinancing, ifnancing ways, and financing operation process in order to have apreliminary understanding. And then put forward the meaning of the leveragedbuy-out financing legal system. Finally, it proposes the basic principle of theleveraged buy-out financing legal system, which should be in the economic eiffciencyand the principle of patry autonomy to construct the legal system of leveraged buyoutfinancing.The second chapter first combs the legal system of preferred stock, high-yieldbonds, and private equity funds. Then it points out the plight of the three ifnancingways in the analysis of status of these three financing ways in China.The third chapter introduces the American legal system of preference shares, legalprivate high-yield bonds, private equity funds, in order to provide a useful referenceimprove financing of these three legal systems.The fourth chapter on the basis of using the experience of the United States, itsuggests methods to consummate the legal system of preferred stock, legal system ofhigh-yield bonds，private equity fund.