PIK: a way to relieve LBO concerns

Article Abstract:

Two major criticisms leveled at management buy-outs are that management and their backers attempt to acquire a company inexpensively and that management does not sharing information about future business prospects with shareholders. One way to remedy this situation is to issue payment-in-kind (PIK) and non-yielding convertible securities to shareholders.This allows investors to share in the potential returns of a buyout with little risk and are persuasive in getting bids recommended by boards of directors. PIK and convertibles were pioneered by Kohlberg, Kravis & Roberts in the RJR Nabisco buyout and were used in the management buy-out of Magnet PLC arranged by Bankers Trust.

Laws, regulations and rules, Securities, Leveraged buyouts, Payment-in-kind program

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ESOPs come of age

Article Abstract:

Employee Share Ownership Plans (ESOPs) afford corporations greater flexibility and choice in their financial planning. There are two major elements to an ESOP: a discretionary trust that can borrow to invest in the firm's shares, and schemes that distribute shares among employees. The creation of an ESOP can be preferable to issuing new shares as an ESOP will offer better earnings per share and allows the corporation more flexibility in benefits planning. In addition, an ESOP can be used to supply shares for the commercial needs of the firm.

Accounting and auditing, Corporations, Corporate finance, Employee stock ownership plans

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