Is finance for an LBO taken on and paid back by target company or your SPV??

When you apply for finance for an LBO, you are using the target company's assets and cashflow as collateral, so I'd presume any debt taken on for the acquisition becomes a liability of the target company. However, don't you apply for this finance via your SPV (rather than in your personal name) in the first place when you're doing the acquisition? So that brings up a question I had - is the debt owned by the target company or your SPV, and which entity is responsible for it? I haven't quite got my head around this yet, despite speaking with a few commercial finance lenders and brokers in the UK about financing for LBOs. Perhaps this is something I should've clarified with them. Or is the reason you apply for the finance via your SPV more to do with the fact that your SPV is buying the target company, not you personally, rather than the SPV taking on the debt?

That brings me to another question - in an LBO, you use (some of) the free cashflow from the target business to pay back any debt, deferred consideration etc taken on for the acquisition. When you pay back the loan repayments on things like asset based lending, deferred consideration etc, how does this work in your accounts? Are these classed as business expenses and is it just a monthly payment taken out of the business bank account? I was under the impression that loan payments in the UK can't be classed as business tax-deductible expenses, only the interest payments can, so wondered how you account for LBO debt repayments, deferred consideration payments to the seller, in your accounts, where they would be listed etc? I still can't quite get my head around the notion of using the cash flow of a business to fund its own acquisition, even though it's a genius concept (well, I understand the concept...it's how it works in practice that I'm still working out....). I just wondered how it works in accounting when you're buying a business with its own cashflow. basically....it's a slight conundrum to get one's head around until you've done it I suppose.

Thanks.

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