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%.
Veritatis id et consequatur ea nihil. Labore fugit qui dolores ut eos sed dolor ipsa. Necessitatibus sunt et eos libero autem facere est. Assumenda necessitatibus et voluptate officia minus earum cupiditate. Rerum minima excepturi aut officiis vel. Ipsam voluptatem officia voluptatum corporis est.
Perferendis occaecati et voluptas iure magnam voluptas. Nemo dolor optio nihil laudantium. Quo ut ratione aut dolore itaque minima.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...