Infrastructure Model Question
Hey monkeys, was practicing an airport LBO case for an infra role. Any help would be appreciated.
The prompt says "the equity check should be on the basis of discounted dividends", so this is basically a dividend discount model. But the prompt also says "assume a terminal value on exit multiple (EV/EBITDA) of 10x"
Kinda confused here, thought the valuation in a dividend discount model is on equity value basis. PVs of dividends and terminal value calculates the Implied Equity Value directly, so no equity value to EV bridge is needed.
So in this case, PV of Dividends is on equity value basis, but the PV of the terminal value is given on EV basis. Am I getting stupid here? not sure how to get the Uses and Sources or even the valuation part right.
is this right? Uses = acquisition debt + sponsor equity check, Sources = equity value + refi existing debt+ fees
Bump
I have absolutely no idea about anything project finance but sources and uses are mixed up, no?
nevertheless bump cuz i'm interested
Subtract net debt from terminal EV to get exit equity value
Thanks man, so pv of exit equity value + pv of dividends will be the equity purchase part of your uses, right?
total uses=equity purchase (pv of dividends + pv of exit equity value) + refi existing debt+fees
total sources=acquisition debt+sponsor equity check (the plug)
kinda confused about S&U cos the prompt said "the equity check should be on the basis of discounted dividends"
size the equity sources based on DDM
and show the LBO which includes the exit assumption using that same equity sources
Thanks man, so my sources should be Source=Acquisition Debt + PV of Dividends from DDM (sponsor equity check, according to the prompt), Uses=Existing Debt Refi + Fees + Equity Plug?
I was thinking Uses = Existing Debt Refi + Fees + Equity Purchase (which is PV of [Dividends +terminal EV - exit net debt]), then calculate the Sponsor Equity Check as the plug on the Sources side
this is not complicated at all.
apply the exit multiple to your last year's EBITDA and after paying off any net debt , assume surplus flows to equity as dividends
line up dividends from all the operating years including the last one that is based off TV, discount them by your required rate of equity (10-12%) to calculate implied chque size
Gotcha, so my sources should be Source=Acquisition Debt + Sponsor Equity Check, Use=Existing Debt Refi + Fees + Equity Purchase (PV of all dividends including the last one), then you calculate the implied sponsor equity chekc, right?
The sp9nsor equity cheque size will be the MAX of present value of dividends / terminal value AND the implied cheque size by facotoring in limitations imposed by the terms (dscr coverage, max gearing) of your acq debt
It’s not that difficult, need to adjust your TV so that you are looking at equity TV - I.e deduct net debt at exit
For the S&Us point depends from what standpoint you look at it, but would be your present value of the cash flows plus TV and acquisition debt on the source side, whereas on the uses you ll have the debt refi fees etc. your proceeds to vendor are a plug (and in this case the recap is assumed to go to the seller)
Hello, I'd like to start preparing for infra modelling. Any advice on where I could find these ressources ? Thank you
Shoot me a PM
Done ;)
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