easy · Debt Capital Markets Primary Issuance & Syndication
In an 'Underwritten LBO Bridge', the bank provides a short-term loan to ensure an acquisition can close, intending to replace it with bonds later.
If the bond market 'shuts down', the bank:
- Can compel the company to hand the acquired assets back and unwind the entire merger.
- Is 'stuck' with the bridge loan on its balance sheet (a 'hung bridge') and must hold it long-term.
- Simply hands the loan exposure over to a rival bank to warehouse and manage at no cost whatsoever to itself.
- Is contractually permitted to double the loan's interest rate every single day until the bonds finally clear.
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