Word: lbo
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...asked about his piloting of the airline, he gets a scowl on his face and pulls out two yellow, legal-size pages of scrunched-up notes to defend his record there from 1989 to 1993. Critics charge that he took the once profitable carrier, burdened by debt from the LBO, to the brink of bankruptcy. Checchi used his charisma to extract some $800 million in union concessions and an additional $837 million in state and local bonds, subsidies and tax credits--while earning $32 million in management and investment fees for his outside firm...
...supervision it provides," says Michael Anesta, the director of personnel for Steinway & Sons, which stopped using Burns two years ago at its Queens, N.Y., piano-manufacturing plant. Former Burns official Gary Slodowski quit in 1990 after winning the company's manager-of-the-year award. "With the LBO, the company started to deteriorate," he says. "They've got away from the building blocks, such as service and visiting clients every day. Collecting cash became the main thing. With no one to pay attention to the other details, you're going to have smoking guns like the Meadowlands...
...ways to restructure their debt, notably by using corporate stock. Firms in relatively good financial health can raise money by offering new shares on the market. Mr. Coffee, which was leveraged to the hilt as the result of a 1987 buyout, was able to wipe out almost half its LBO debt through a new issue last May. Another technique is the debt-for-equity swap, in which corporations retire their bonds by giving lenders corporate stock. That strategy was employed by furniture maker Interco, which last week announced that it will swap 95% of the stock in the company...
Under those circumstances, debt can make firms less competitive. Since RJR Nabisco's leveraged buyout in late 1988, in which the corporation assumed some $25 billion in debt, the company has lost market share to rival Philip Morris because RJR's management is so absorbed with managing the huge LBO, many analysts contend. In addition, loan payments, which average 30% of corporate cash flow, often divert money away from more productive pursuits, including research, advertising and capital spending. While Phillips Petroleum was digging out from under its $9 billion debt, the corporation had to pass up several opportunities to acquire...
...devoted reader of true crime stories and a demon for detail, Burrough weaves suspense into his tales of high finance and intrigue. "I try to write somewhat the way a good murder mystery is written," he explains. "My stories sometimes read as if ((LBO king)) Henry Kravis were approaching with an ax instead of a buyout offer." Burrough may have hit the peak of fascination with 1980s whodunits. As the 1990s wear on, his agent Andrew Wylie says with literary disdain, readers are likely to become more interested in advice books on "how to stave off disaster...