Suppose that a private company wants to raise money, but they want to do so only be issuing debt (i.e. bonds). Why isn't this method of raising money more common? I realize how an LBO works by issuing massive amounts of debt to buy out a company. But suppose that there is a new company. This company wants to not dilute the existing shareholder's value, and therefore, it only wants to issue debt. Is this possible or common? If so, why/why not?
Going public by only selling bonds
Jan 31, 2008
3 Replies
It's possible, but it is still a private company. A bondholder is not an owner in the company.
704set
Donald Trump sold bonds to finance one of his Atlantic City properties. Eventually, the bondholders had to settle for a few pennies on the dollar plus stock in a newly (since bankrupted) public company.
It's possible, but you're still a private company (you do have to make some SEC filings on your commercial paper).
One example I can think of off the top of my head is Belk, the department store chain.
Join the Discussion
Have something to add? Share your thoughts — no account required.
Didn't find your answer?
Ask the community — no account required