Hey all,
I am modelling a leveraged recap for a case competition, and I am a little puzzled.
The deal offer is to exchange one old share for a significant cash dividend, PiK junior debt, and finally, a share in the new company (the stub).
How do you model the value of this stub equity in the new firm? Does it only become valuable once the debt from the recap is paid off, since any leftover FCFF is being used to pay down the debt?
Any advice on how to model its value would be appreciated!
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