alt Hacker NewsLBO's are like buying a rental property where the mortgage is approved based on expected future rental income from the property.
That's why the parent is saying "It is like paying for the company with the money from the company you are buying.".
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Exactly. That is largely how commercial lending is underwritten: by ensuring the DSCR (debt service coverage ratio) is over 1.0.
That's exactly HOW rental properties are (supposed to) be bought!
Most small-time single family landlords actually go above and beyond that and "pretend" the rental is a house they're buying to live in (or actually is, for a time) and get a "home owner's mortgage" which is even easier.
Large commercial real estate is sold and loaned based on future rental income, pretty formulaically.
LBOs are much worse than that. It's like buying a rental property where the mortgage is owed by the a shell corporation that owns the property. The shell corporation, not the purchaser, owes the debt.
It's like taking out a mortgage on a house, but letting the house owe the debt.