LBO: Net Debt vs Debt in minimum equity
Hi guys,
I am doing the "WSO-PE-Guide-Full-LBO-Example-1-vF" exercise and had a question on coming up with the S&U.
I'm sure you guys are familiar with this but the prompt said minimum equity of 30% and PIK notes is $450 in the staple financing package and is a plug on Sources. If I were to use "Exist. net debt retirement" instead of "Exist. Debt Retirement" as shown in the above image, total uses will change and therefore total sources will change and sponsor equity & PIK notes on Sources will change. I don't think Sponsor equity should be dependent on whether we use net debt or total debt on the S&U. Can someone please help me come up with the S&U using net debt vs. the above? Happy to provide additional detail if needed.
Use total debt when calcing equity to cap
Thanks. So use total debt when applying min equity?
Yes
But then wouldn't your % capital next to "sponsor equity" be misguided? I.e. that would show % capital next to "sponsor equity" at 32.2%.
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