Sticky Leverage

The WSJ published an article titled “Sticky Leverage” stating that the leverage for companies is continuing to increase. Leverage is defined as a company’s debt divided by its cash flow or EBITDA. The WSJ sticky leverage article discusses large companies and large buyout deals but the same is true for smaller companies. Many have been negatively impacted by the current economic slowdown, and their leverage is higher because their debt has remained the same or increased while cash flows have decreased. Compounding the problem, lenders are making new loans but at lower debt to EBITDA multiples making it practically impossible […]

VCs want bail out money? Really?

The WSJ reported that VCs are lobbying the government to get access to SBA funds from which they are currently excluded. What the article didn’t mention was that this exclusion only applies to companies that are majority owned by VCs. That is they own more than 50% of the ownership. VCs advocate that young high growth companies create 80% of new jobs, which is true. However, companies that are controlled by VCs typically got that way because the company didn’t live up to initial expectations and VCs took more and more capital. Choosing between providing funds to those companies versus […]