From 2004 to 2007, the titans of private equity tapped yield-hungry investors to raise massive amounts of buyout capital. Eager to deploy this easy money, they spent billions taking huge companies private, shattering records for mega-deals only to see them surpassed a few weeks later. The list of companies taken private includes many famous names: Toys 'R' Us, Hertz, Harrah's Entertainment, Tribune Co., and TXU, the Texas utility that set a record for buyouts in a deal worth over $44 billion.

Now many of those companies are staggering under the sheer weight of their debt. Bond investors, who once eagerly poured their money into the high-yield debt that made leveraged buyouts possible, have seen their holdings decimated. With the bonds that helped pay for some of the biggest private equity deals trading at less than 50 cents on the dollar, some worry whether the companies can stay afloat.

For details on eight big buyout targets that are now teetering on the brink, click through the following gallery.

There are strange goings on in the markets these days. The latest catch 22 is the rally in junk bonds. Bloomberg reports that "The lowest rated companies that may not be able to afford avoiding bankruptcy and exchanging or buying back debt at the lowest prices on record." That is pushing the prices of junk bonds up in the biggest rally ever. The flip side is that this practice is the higher prices are crowding out some of the neediest companies

Here are some examples:

• The Blackstone Group LP (NYSE: BX) owns Freescale Semiconductor Inc. In March, Blackstone wiped away $1.9 billion of Freescale's debt by offering investors 32 cents on the dollar in loans. Since then the securities have tripled to 54.1 cents on the dollar. Now, the chip maker still has $7.5 billion of debt and would need to do it at much higher prices.

Lately, there have been some scary stories -- such as in BusinessWeek and Forbes.com -- about the buyout of Freescale, which is a major semiconductor operator. The transaction came in September 2006 at $17.6 billion.

The latest earnings report was anemic. Plus, the company's bonds are selling at distressed levels. And CEO Michel Mayer quit his post in February (but don't cry for him as he took millions in a nice payday). And of course, Freescale's key customer, Motorola, Inc. (NYSE: MOT), is ailing.

So, might this prevent further buyout deals in the semiconductor space?

Not necessarily. According to a piece in Financial News, it looks like KKR is still bullish on the sector. Actually, the firm made an investment in the sector, NXP, which has taken a drubbing.

But, then again, private equity is supposed to take the long view, right?

Well, KKR thinks that NXP could be a vehicle for consolidation. And, the firm has no shortage of cash to pull it off. Besides, NXP recently sold its wireless assets to STMicroelectronics for a cool $1.5 billion.

It's a gutsy move for KKR -- but does make sense. With a cyclical downturn, there should be many bargains. Plus, there are opportunities to cut costs.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Freescale is the old chip giant that was acquired by a private equity group led by The Blackstone Group (NYSE: BX), The Carlyle Group, and Permira Advisers. Prior to being public, this was a unit of Motorola Inc. (NYSE: MOT).

The company still has to report earnings as though it was a public company because of its ratings and because of its public debt. The company has shown that over the last twelve months, the company's adjusted EBITDA was $1.55 billion.

Net sales for Q1-2008 were $1.405 billion, up from $1.361 Billion in Q1-2007 and down from $1,539 billion in Q4-2007. Unfortunately, the company is still posting an operating loss of $152 million for the quarter, compared to $654 million in operating losses in Q1-2007 and $595 million in Q4-2007. The net loss after items for this last quarter was $245 million, also down from a loss of $539 million in Q1-2007 and down from a loss of $525 million in Q4-2007.

Its cash and total short term investments were $1.25 billion on March 28, 2008, compared to $751 million at the fourth quarter ending December 31, 2007; and its accounts receivable were $680 million and inventory was $732 million. But here is where things get tricky. Its long-term debt is $over $9.3 billion alone. Of the company's total asset base of $15.197 billion, more than $5.3 billion is goodwill and more than $3.6 billion was listed as intangible assets.

If you go back to the BloggingBuyouts article, "Why private equity firms avoid technology companies," you'll see that being a highly leveraged technology company that requires high capital expenditures isn't always the greatest place to be be. Unfortunately for all the private equity partnersm the company can't live on EBITDA alone and many believe that Freescale will need more capital and thus more leverage.

The original private equity deal was put at $17.6 billion for an enterprise value. So far that isn't turning out too great. Who knows, maybe a re-IPO of Freescale isn't too far off.

Jon Ogg is a producer and editor of the Special Situation newsletter for 247WallSt.com.

If you've ever wondered why so many low-P/E ratio technology companies haven't been gobbled up, there is a really good explanation: R&D, leverage, and volatility.

Business Week just ran a great cover story titled "When a Buyout Goes Bad" for this week's magazine. The case in hand is the old private equity buyout of Freescale, which was the chip business from Motorola Inc. (NYSE: MOT). This talks about a company that was turned around from the edge of the cliff by a great tech leader who created a great stock again. Then the $17.6 billion buyout came from a group led by The Blackstone Group (NYSE: BX), Carlyle Group, and Permira Advisers. This buyout came after being in a competing bid from a consortium led by KKR, Bain Capital, Apax Partners, and Silver Lake Partners.

Last year the company's revenues fell 10% while the chip sector revenues grew by 5%, then Motorola announced a spin-off or sale of its handset business, and then there is the issue of the $9.5 billion in debt that was clumped on top of the company to get the private equity buyout done.

Unless you are selling transistors and capacitors or just plain Jane DRAM, technology companies require heavy R&D commitments. This is why historically technology companies used to come public back before the 1990's "get rich from tech stock option awards" became the norm. The accounting changes required investor backers of a different group to mark down 15% of their $7 Billion stake as well. In fact, it notes that it is having a hard time ponying up the $1.2 billion for R&D and $400 million for capital expenditures needed for Freescale. And now there are inventory problems.

For me personally, I am not all that surprised that Freescale was a temporary success. One night right shortly before Freescale was spun-off by Motorola, I was flying from Austin to Chicago. I spoke to two workers that said they were low level managers for Freescale. When they called the company "Free-Fall" and told me about some of their pension or retirement issues and stock option plans getting mixed up (not for the better, at all), it left a bad taste in my mouth. Then when this one went private with that much debt and knowing what comm-chip R&D percentages of revenue were, I thought the billionaires were drinking too much of the cool-aid.

You should read that article as it puts it well into context. This is why niche technology companies generally end up being acquired by other niche technology companies or by larger tech companies that are competitors or that can complement each other. In mid to late-2006 you started seeing the private equity frenzy go into overdrive.

If you want good news or the silver lining, I do actually have some. I think that there will be another wave of public technology companies that get acquired. But the buyers will almost all be LARGER public technology companies. Private equity and technology can mix, but the deals need to be smaller deals with less leverage and in companies that require less R&D.

TheStreet.com's Jim Cramer says until we have some failures, he doesn't share the pervasive gloomy outlook.

Where are all the bank failures? When is a Freescale (NYSE: FSL) (Cramer's Take) or an Outback going to go under? How can Cerberus put on such a happy face? Why don't some newspaper or radio station companies fail?

As I read the article on Goldman Sachs (NYSE: GS) (Cramer's Take) today, I am struck by its sheer negativity. The Journal article makes it sound like Goldman is sitting on a pile of huge losses, paper that's never going to sell.

But I have to remind these naysayers that this is corporate debt, and corporate debt -- unlike so much of the housing debt of 2005-2007 -- is actually based on something, some standards, that actually might get it through.

Shares of Sigmatel Inc. (NASDAQ: SGTL) are surging some 59% to $2.85 pre-market today. Freescale is paying $110 million, or $3.00 per share in cash, to acquire the small integrated circuits designer.

Interestingly enough, this was one of the old iPod-beneficiary stocks and if you look at a chart from 2004 you will see it had a great move from 2004 to 2005. If you look at the long-term chart you will see that shares traded over $40.00 back then, and now here we are at $1.79 Friday and a $3.00 buyout this morning.

Now Freescale looks like it is making a bottom fishing acquisition. Frankly, investors should expect a "blocking the buyout lawsuit" because this is going to act as a "Locking In Your Losses" buyout and it isn't even going to compensate all holders that got in over the last year. You cannot blame Freescale for being an opportunist, but the board of Sigmatel is hosing most of its shareholders. Obviously they are worried about the company having any relevance, but this is perhaps one of the more egregious merger acceptances seen by a board of directors.

The good news is that this may be a floor-buyout because there is a 30 day "go-shop" provision in place through March 4, 2008. The buyout is also subject to shareholder approval, and you could imagine there are many holders who will vote against this. If the merger happens, it is expected to close in the second quarter of this year.

Many mergers and buyouts are strange, and sometimes boards of directors are under question as to why they would sell at a certain price. But this merger is just outright freaky.

Jon C. Ogg is an editor of 247WallSt.com.

The Washington Post thinks the recently announced deal by Silver Lake Partners and Texas Pacific Group to take telecommunications equipment maker, Avaya, Inc. (NYSE: AV), private indicates a perilous decline in credit standards. And the Post thinks this decline will contribute to the end of the takeover boom.

I always feel a bit skeptical when I read these kinds of articles. It's not so much that the logic is flawed, but the timing is often hard to pin down. I am guilty of doing the same thing myself since I wrote something similar last August. And yet the takeover boom refuses to bend to the will of the pundits.

The Post believes there are three reasons why the takeover boom has peaked:

Senator John McCain likes to say that the federal government is like a drunken sailor. He then apologizes to sailors.

We've also seen some drunken behavior in private equity. Then again, with a stable economy, cheap debt and tons of equity capital, why not do lots of deals – even if some are dicey?

In today's Wall Street Journal [subscription only], it now looks like some of the deals are not looking so good.

Keep in mind that buyout transactions involve lots of debt. So if things come undone, the consequences can be severe.

Some of the problematic deals include Linens 'n Things, Star Tribune, and Freescale.

Basically, these are companies in volatile industries. For example, Linens 'n Things must not only deal with tough competition but an ailing real estate sector; Freescale is in the rough-and-tumble semiconductor space and its biggest customer, Motorola (NYSE: MOT), is lagging; and the Star Tribune is suffering from the diversion of advertising money to dot-com properties.

True, this is a small sample. But we are still in the early stages of the buyout surge, so it's tough to gauge what may happen. Although, if the economy falters and interest rates continue to rise, we'll definitely see more deals go sideways.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Senator John McCain likes to say that the federal government is like a drunken sailor. He then apologizes to sailors.

We've also seen some drunken behavior in private equity. Then again, with a stable economy, cheap debt and tons of equity capital, why not do lots of deals – even if some are dicey?

In today's Wall Street Journal [subscription only], it now looks like some of the deals are not looking so good.

Keep in mind that buyout transactions involve lots of debt. So if things come undone, the consequences can be severe.

Some of the problematic deals include Linens 'n Things, Star Tribune, and Freescale.

Basically, these are companies in volatile industries. For example, Linens 'n Things must not only deal with tough competition but an ailing real estate sector; Freescale is in the rough-and-tumble semiconductor space and its biggest customer, Motorola (NYSE: MOT), is lagging; and the Star Tribune is suffering from the diversion of advertising money to dot-com properties.

True, this is a small sample. But we are still in the early stages of the buyout surge, so it's tough to gauge what may happen. Although, if the economy falters and interest rates continue to rise, we'll definitely see more deals go sideways.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Over the past few years, private equity firms have shown an appetite for mega deals -- and even riskier sectors, such as semiconductors.

A prime example is the $17.6 billion buyout of Freescale. The buyers included Blackstone Group, Carlyle, Permira Advisers, and the Texas Pacific Group.

Well, according to a piece in the Wall Street Journal [a paid service], the deal may show the inherent risks of the new approaches to private equity. That is, Freescale has posted weak financials lately. A big problem as been the slowdown from its major customer, Motorola, Inc. (NYSE: MOT).

Of course, the private equity sponsors understood the volatile nature of the semiconductor industry. They also realized that the debt markets were carefree with lending money. As a result, there is about $1.5 billion in Freescale debt that is variable. This means that the company can defer payments (kind of nice, huh?).

This is fine so long as the company eventually comes back. But, history is not so kind to semiconductor companies and there is certainly a good amount of competition. Another nice feature: Freescale can call on $750 million in new loans at any moment.

No doubt, it's good to be in the private equity business. Although, as for those holding debt in these deals, it does look fairly risky.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Private equity firms are certainly hungry for semiconductor firms, such as the $17.6 billion buyout of Freescale. And recently there was the proposed $5.5 billion deal for Advanced Semiconductor Engineering.

An analyst at Prudential, Mark Lipacis, has put together a buyout list. Basically, he focuses on what private equity firms like -- lots of cash and cash flow.

His picks? Here's a look:

Altera (ALTR)
Analog Devices (ADI)
Linear Technology (LLTC)
Maxim Integrated Products (MXIM)
Texas Instruments (TXN)

Remember, there's a reason that semiconductor companies have lots of cash: the industry is cyclical. If the economy goes south, these companies can wait it out.

And it does look like the economy is slowing down. So if these semiconductor companies take on huge amounts of debt, might they be vulnerable?

Perhaps. But so far, it seems like private equity firms are far from concerned.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.

HCA, which is the biggest hospital company in the US, is going through the leverage buyout process. This means borrowing huge amounts of money – such as from banks and bond investors.

Well, it looks like there is little trouble raising the capital. Today, HCA was able to issue $5.7 billion in high-yield bonds.

Actually, keep in mind that "high-yield" has another name – ie, "junk bonds." These are bonds that have a relatively higher risk of default. In particular, the bonds have terms of 8 to 10 years. And, what do investors get? The yields range from 9.125% to 9.25%.

That's certainly better than what investors can get from the Treasury market.

Yet, there is definitely some risk. If HCA has trouble, so will the bonds. But, hey, that's for another day.

Something else: with the ease of the HCA financing shows there is lots of liquidity for buyout bonds. Actually, the next mega deal to get financing is Freescale, which will involve $9.4 billion in bonds.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Financial Statemet. He also has a blog at www.taulli.com.

MOST NOTEWORTHY: Broadcom (BRCM) and News Corp (NWS, NWS.A) top today's extensive list of downgrades.

• Broadcom Corp (NASDAQ: BRCM) was downgraded by JMP Securities to Market Underperform from Market Perform, citing valuation and the chance of cautious guidance for the December quarter.
• Soleil Securities downgraded News Corp Ltd. (NYSE: NWS, NWS.A) to Sell from Hold citing the company's deteriorating asset efficiency following the change in senior management compensation structure.

OTHER DOWNGRADES:

• Lower than expected September traffic and unit revenue estimates forced Calyon Securities to downgrade US Airways Group Inc. (NYSE: LCC) to Add from Buy.
• The negative pre-announcement from Legg Mason Inc. (NYSE: LM) triggered downgrades from Freidman Billings Ramsey, to Underperform from Market Perform, and Merrill Lynch, to Sell from Buy.
• And finally, Freescale Semiconductor Inc (NYSE: FSL, FSL.B) was downgraded to Hold from Buy at Citigroup after the consortium led by the BlackStone Group made the company an offer to take them private.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

After reaching $100 a share in 2000, it's been mostly torture for shareholders of 3Com as it spiraled lower and lower. But today, the stock got some juice, increasing 12.58% to $5.01.

A report from Bloomberg indicates that the company is a possible takeover target. The theory is that one or more private equity firms will make a bid of $7 per share.

Apparently, the big interest is in 3Com's joint venture with Huawei Technologies Co. This has been a key growth driver.

But, with the recent big buyout deals – such as the takeover of Freescale – there are now a lot of rumors swirling. For the most part, rumors are just that. So, as always: investors beware.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.