Hey guys,
I need some help. I am currently doing an LBO case study and I was wondering whether I can apply a cash sweep for TL B and C and if so, do I just amortize over the period?
Currently I am using the cash sweep only on TL A. Is that even possible?
Thanks
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You can do that. Just make sure Term Loan A is closed before you start prepaying B, B is closed before C and so forth. Not sure what you are asking with the amortization question but your term loans should also be incurring scheduled amortization each period regardless of whether you have discretionary paydowns built in.
I'm not even an SA yet, but from my understanding, the TLB and TLC should state if there is early repayment (full principle) without penalty - Almost every time the principle can be paid back early (unlike senior notes for example). Then, the key is just to gauge how much of a cash flow sweep you want: 50%, 75%, 100%? Does your company want to actually build up the cash balance (then don't use cash flow sweep), etc. Once again, I could be totally wrong...but good luck!
There is nothing said about a penalty. I just have to come up with some capital structure.
Following scenario: TL A is paid down after 5 years. TL B/C have maturity of 8/9 years with bullet payment. Now my cash flows would allow me to pay down TL B from year 6-8 over time but not as a bullet in year 6. How is this treated? Do I have to pay TL B, which initially was a bullet, as a bullet or could I pay it over time?
If you're making voluntary prepayments on a loan generally you're not required to prepay the entire thing at once.
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