Q: You have an ABL revolver worth 90M secured against 100M in AR with 85% recoverable value. If 35M is already drawn on the revolver, 10M due to venders, and 50M in cash, what is the company's liquidity?
Would the answer for this be 90-35 + 50? So the due to the venders isn’t accounted for? Also not sure what to do with the 85% recoverable value
| +189 | Americas M&A League Table Q2 Updated | 75 | 15h |
| +141 | New Article: Dramatic Slide as UBS #22 (US) & New Leadership Desperately Needed | 36 | 6h |
| +118 | Restructuring: Anti-climactic Experience | 31 | 8h |
| +86 | IB Net Worth / Savings Check | 38 | 3h |
| +75 | A COMPLETE GUIDE TO SUMMER INTERNSHIP RECRUITING | 12 | 2d |
| +51 | Boutique firm wants access to my LinkedIn? | 40 | 1d |
| +48 | Woman who emptied Knicks trashcan on street then stole it was DEI exec, worked at JPMorgan Chase | 12 | 11h |
| +40 | Investment Banking is Hard | 17 | 1d |
| +31 | PWP vs BofA | 24 | 4h |
| +30 | AI + Financial Modelling | 7 | 1h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
100
So you’re saying it’s
85-35 + 50?
55+50=105M of li(t)quidity
This is correct. Liquidity is cash + revolver availability. Cash includes drawn funds. So it’s 90-35+50 = 105
ABL Commitment = $90mm
ABL Borrowing Base = 85%*$100mm = $85mm
ABL Loan Limit = min($90mm, $85mm) = $85mm
Letters of Credit = $10mm
Liquidity = Cash + ABL Availability = $50mm + ($85 - $35mm - $10mm) = $90mm
This is the correct answer. Your borrowing base is being limited by the actual AR outstanding (e.g. credit card receivables of a brick and mortar retail company with dwindling sales), so your ABL capacity is actually only $85M. Less the $35M drawn and $10M letters of credit, you only have a $40M availability on the ABL. A company's liquidity is the revolver availability + outstanding cash.
Is there a reason why we assume the AP to be a letter of credit?
Given the context of the question, I'd assume that the $10M outstanding to vendors is a short-term promissory payment that affects liquidity. I think if you explained your reasoning in the interview, the interviewer would be more than satisfied.
Quia et dolore qui delectus quae commodi. Quia dolores in et natus.
Assumenda et explicabo est ut minus quis dolore. Ut tenetur expedita doloribus ipsum molestias labore. Modi voluptas possimus expedita aut aperiam vitae asperiores. Et sed et vitae molestiae tenetur.
Architecto porro qui sint incidunt. Et non consectetur qui ipsum. Enim voluptate ratione est ea neque placeat et. Et est minus amet consequatur. Molestiae qui tenetur consequatur voluptas consequuntur impedit.
Similique repellat doloribus omnis est nisi et. Laborum praesentium perferendis et nam. Voluptates est ab asperiores neque eius aspernatur. Rerum dolores aliquid porro ab sit ut. Qui accusantium occaecati nisi omnis. Voluptas aliquam neque ipsum ab corporis.
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...