class="textPage">A company can be in a position where it is laden with high debt and interest cover ratio is high. This reduces the profitability of a company.
class="textPage">Private equity firms who have good relationship with lenders and are skilled at deal structuring were they are able to re-structure loans which will reduce the cost of capital.
class="textPage">There has been an increase in the supply in credit in the past few years which resulted in a lowering in the cost of capital (this explains why a lot of the recent buyouts have been transacted at a higher EV/EBITDA multiple).
class="textPage">The value that this strategy can create however is limited because only a small proportion of the cost of the company is interest and there is a limit to how much a corporation can reduce total costs.
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