Loan-to-Own
Private Equity glossary · Private Equity Fundamentals
Definition
Distressed debt strategy aiming to acquire control through bankruptcy-based debt-for-equity conversion.
Loan-to-Own in plain English
Loan-to-own is a sneaky-clever strategy for taking over a struggling company by buying its *debt* instead of its stock. Here's the trick: when a company is drowning and heads into bankruptcy, its lenders often get first dibs and can end up converting the money they're owed into ownership of the company itself. So an investor deliberately buys up that debt cheaply, betting the business will collapse into bankruptcy — and when it does, they trade their IOUs for control of the whole company. It's like buying up someone's overdue loans not to collect the payments, but because if they can't pay, you get to keep the thing they borrowed against.
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