Several years ago, I was a manager of a fund that provided bridge loans for companies. It was a pretty good business – but had its risks.

Here's how it worked: Occasionally, companies waiting for some large piece of financing need temporary financing to tie them over. My company provided these temporary loans at juicy interest rate levels and in exchange for some equity and lots of protection.

Well, according to a piece in the NY Times, it looks like bridge financing is making its way into buyout deals too. For example, there will be bridge financing for the massive buyout of TXU Corp. (NYSE: TXU). That is, a variety of banks will provide about $1 billion to the private equity firms KKR and Texas Pacific Group.

This type of financing, however, is not debt, but rather a form of equity called an equity bridge. In other words, if a deal implodes, it could be a big-time problem for the lenders. After all, in the event of a liquidation, the stockholders are last in line (which, in many cases, means getting $0).

Actually, equity bridges are not new. It was very popular during the late 1980s. Yes, that's about when the last buyout boom self-destructed.

As for the TXU equity bridge, the lenders include the following: JPMorgan Chase & Co. (NYSE: JPM), Morgan Stanley (NYSE: MS) and Citigroup Inc. (NYSE: C). Something to watch.

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