A type of leverage that is made up of borrowed funds such as loans, credit facilities, bond issuances, etc. Cash-producing leverage can be defined as the change in the amount of cash a firm generates or expects to generate from a certain amount of borrowed funds. Borrowed funds provide the primary source of leverage used in typical alternative investments such as leveraged buyouts (LBOs), leveraged real estate, and convertible bond arbitrage. For example, cash-producing leverage can be obtained through prime brokerage relationships, revolving credit agreements, term loans, the public sale of bonds in the corporate, mortgage and private placement markets.
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