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Banks are increasingly turning down companies seeking financing to pay for debt-laden takeovers after the recent market rout left them saddled with debt from earlier

Banks are increasingly turning down companies seeking financing to pay for debt-laden takeovers after the recent market rout left them saddled with debt from earlier deals. Credit Suisse Group AG, Jefferies Group LLC and Wells Fargo & Co. are among the firms turning down new requests for financing-typically from low-rated companies-as they retreat from the lucrative but risky business of backing debt-heavy buyouts (WSJ, M&A Bankers Saying No to MOre Junk, March 21, 2016).

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1. Why do you think investors have lost their appetite for the riskiest securities? 2. Why doesn't the interest rate on these riskiest loans simply rise to the point that these risk-averse investors buy them? 3. If debt financing for takeovers isn't possible, why don't acquirers issue equity to finance the deals instead?

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