You can read the Wikipedia article on leveraged buyouts, but essentially WP is taking max loans at a low interest rate to (1) get huge returns on the money they invested in 2007 and (2) reduce the tax on the returns to their investment. Since 2007, they have virtually tripled the debt load to buy B&L, Eyeonics, and ISTA, thereby leveraging up their relatively small equity investment. These loans are secured by the hard assets owned by the 3 companies and will be paid back by increasing cash flow through efficiencies (that is, layoffs and site closures). Specifically, "because of the importance of debt and the ability of the acquired firm to make regular loan payments after the completion of a leveraged buyout, some features of potential target firms make for more attractive leverage buyout candidates, including:
A multi-year history of stable and recurring cash flows;
Hard assets (property, plant and equipment, inventory, receivables) that may be used as collateral for lower cost secured debt;
The potential for new management to make operational or other improvements to the firm to boost cash flows, such as workforce reductions or eliminations;
Market conditions and perceptions that depress the valuation or stock price."
