Waterfall Recovery Question
A company has $25mm EBITDA and trades at 8x. It has a $100mm revolver, $75mm 2nd lien term loan, $50mm bonds maturing in 2019, $50mm bonds maturing in 2021, and $50mm in equity. What are their market values? I understand how to do a basic waterfall, but don't understand how maturity plans a role. Should the $50mm bonds maturing in 2019 get paid out first? The two bonds are in the same tranche but have different maturity dates?
first off the year is 2020 so the bonds maturing in 2019.....not enough info if the $100 RC is drawn but I’ll assume so. any cash available? I’ll assume $0. here’s what we have
EV $200mm RC should be Par 2nd Lien TL should be Par $25mm pro rata split to bonds (assuming pari passu) 25% recovery on those guys. in theory you could say the bond maturing sooner trade better than 25 but this company is in BK and both are trading like claims since there is no chance of someone lending to take them out no equity value ($50mm sounds like BV)
wouldn't it be 25% recovery on bonds or am I misunderstanding? thanks for the response btw very helpful. also, why would a bond maturing sooner trade better theoretically?
I thought it was changed - 25pts and bonds should trade like claims (pari)
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