Question from Vault Guide
I saw the following question in the Vault Guide but don't understand the rationale behind the answer. Can someone explain please?
Q: A company currently has 3x senior leverage and 5x junior leverage. If the company sells for 9x EBITDA, what happens? A: This is a deleveraging transaction because the PF company has a lower total debt / EBITDA ratio.
I don't understand why a 9x sale price means that total debt / EBITDA has changed. Can someone explain? Thanks.