LBO – Leveraged Buy Out


I asked my twin Mark to write about LBOs and he then had the audacity to tell me that he was gonna pull out his text books from his business school before he could write about LBO.

My first reaction was “You are a great writer and do not need any books because this is something you can write about half asleep”.

Mark brought to us BRAND YOURSELF, Venture Capital, Cloud Storage, etc… I should share more of his work.  But apparently lately he is too busy marketing Emirates so I am writing this one without my twin’s feedback.

A Leveraged Buy Out simply means that you purchase an asset or a company with barely your own money.

<< What is a ‘Leveraged Buyout – LBO’

A leveraged buyout (LBO) is the acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. Often, the assets of the company being acquired are used as collateral for the loans in addition to the assets of the acquiring company. The purpose of leveraged buyouts is to allow companies to make large acquisitionswithout having to commit a lot of capital.

Read more: Leveraged Buyout (LBO) Definition | Investopedia
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Mark and I are accountant and IT types so we read a lot and keep an eye on world affairs and we are die hard news reporters.  We read balance sheets and the bottom line.

Canada had something some years ago which allowed people to buy rental properties using LBO.  I fell for that thing too because I am like stupid somewhat.

You could buy up to $3 million in real estate for renting out.  Canada hates homeless so the whole idea made sense.

You only had to put down 5% of the cost of each property plus the lawyers and registration.

That is how I became a Landlord – but a young black woman in this market was not good at all because I am a bleeding heart.

Six years after housing too many people in Moncton and people literally wrecking the properties or skipping rent while my Property Manager was driving up and down to collect the rents so that we could make the bank payments, I filed for bankruptcy.

Ask Mitt Romney about LBO.

Ask Donald Trump about LBO and bankruptcy.  He filed 6 times so far so when he brags off his money, those who know how he made money just laugh.  But he is a shrewd business man.

When you file for bankruptcy, you loose nearly everything you own and you are put on a monthly budget and all extra income is put in the bankruptcy account to pay off creditors.

However, in 2009, Canada had made some changes to the bankruptcy act and the Province of New Brunswick could not longer take away the primary home or car.

Something interesting happened.  I hit Google and read.  Knowing that I could not lose the house or car, I met a bankruptcy team and they filed papers for me.  I had to indicate which assets I wanted to keep and pay for.  I chose the main home, my car (I am a car fanatic and then some toys). They took away all my credit cards.

Considered a high income earner, I then had to pay $1000+ per month for 21 months and could not access credit.

My tenants were defaulting monthly and my bills were $30,000 per month.  I had a mortgage (still do), car payment and private school tuition for Becky.  I was only being paid $10,000 per month and my bills were $30,000.  The tenants would pay me $20,000 and I was short $10,000 per month.  I applied for help from the government and no one helped me.  Just the property taxes on each property were also too much.

One day my former business partner and I drove to Fredericton to negotiate on the taxes.  This B tells me “Madame Nangalama, we cannot help you”.  I put a stop order on the bank account for their monthly withdrawal.  Told her “Let me proceed to put 57 families on the street and grow your homeless numbers”.  Walked away and drove away from $3 million loans plus other credit it ended up being $4 million.

Being black and looking like a kid was my main problem.  People get away with borrowing a lot of money but I was a kid playing with the Biggies.

No regrets at all because even where being a young black girl was a problem, the laws worked and the judge dismissed the case for the 3 banks had flown in their best lawyers (did not even show up in court).  Banks are very greedy.  They lend you money based on your monthly salary but when it comes to needing help from them, they give you nothing.  Jesus Christ Superstar!  It was not even about making money but about taking people off streets and giving them a home.  And our province is not like Ontario.  In Toronto, you kick out someone if they miss one month of rent.  In New Brunswick, you must give them up to 3 months to pay while paying the mortgage, rent and maintenance on the property.  I am a Toronto brat but had no idea that New Brunswick protects none rent payers and protects the tenants.  No money worth making while slaving your ass off.

Trump filed for bankruptcy 6 times and many banks turned him away.  He is now a multi billionaire in dollars.  He used LBO and many lenders regret why they did not work with him.  I am only one bankruptcy down and one day, someone will ask why they did not help me when I was doing community service.  In any case, I only need $1 million.

Martha Leah Nangalama

Moncton, Canada

IT and Business.  Human Rights and Social Justice is my area.  As long as the masses are not fed or get great education, I will fight to my last breath.

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