Repo 105

Definition:

Repo 105 is a repurchase agreement that results in the manipulation of financial statements. Under repo 105, short term loan is recorded as a sale and the cash obtained through this "sale" is used to pay down debt to bring lower leverage on the company's balance sheet. According to the bankruptcy court examiner, repo 105 was used three times by Lehman went bankrupt in 2008.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

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