2hr case study - Toll Road Three Statement Model

Based on the most helpful WSO content, here's how you can approach a 2-hour toll road infrastructure case study with a focus on a three-statement model, debt schedule, and two-tier returns:

1. Understand the Prompt and Key Assumptions (15-20 minutes)

• Carefully read the case study prompt to identify key assumptions such as:
  • Toll revenue drivers (traffic volume, toll rates, growth rates).
  • Operating costs (fixed vs. variable costs, maintenance expenses).
  • Debt structure (interest rates, repayment terms, DSCR requirements).
  • Tax rates, depreciation schedules, and any other financial metrics provided.
• Highlight any specific requirements for the two-tier return analysis.

2. Build the Three-Statement Model (60-70 minutes)

• Revenue and Operating Costs:
  • Start with traffic volume projections and toll rates to calculate revenue.
  • Deduct operating costs to arrive at EBITDA.
• Depreciation and Taxes:
  • Use straight-line depreciation for the asset's useful life.
  • Apply the tax rate to calculate net income.
• Cash Flow Statement:
  • Begin with net income, adjust for non-cash items (depreciation), and account for changes in working capital.
  • Include capital expenditures and debt-related cash flows.
• Balance Sheet:
  • Link assets (e.g., toll road value) and liabilities (debt schedule) to ensure the balance sheet balances.

3. Debt Schedule Build-Out (20-30 minutes)

• Construction Debt:
  • Model the drawdowns during the construction phase based on the spend profile.
• Refinancing with Long-Term Debt:
  • Sculpt the long-term debt to match contracted cash flows with a DSCR of 1.30x.
  • Include interest payments, principal repayments, and any balloon payments.
• Debt Metrics:
  • Calculate key metrics like DSCR, total leverage, and FCCR to ensure feasibility.

4. Two-Tier Returns Analysis (20-30 minutes)

• Equity Returns:
  • Calculate post-tax levered returns for equity investors.
  • Use the assumptions provided to back into the equity purchase price or IRR.
• Debt Returns:
  • Assess the returns for debt investors, considering interest income and repayment schedules.
• Sensitivity Analysis:
  • Run sensitivities on key drivers like traffic growth, toll rates, and operating costs to evaluate the impact on returns.

5. Presentation and Final Review (10-15 minutes)

• Summarize key outputs, including:
  • Projected financials (revenue, EBITDA, net income).
  • Debt metrics and repayment schedules.
  • Equity and debt returns, along with sensitivity results.
• Ensure your model is clean, logical, and easy to follow.

For additional resources, you might find Ed Bodmer's project finance exercises helpful (https://edbodmer.com/project-finance-exercises/). Good luck, and enjoy that lunch in London!

Sources: Interviewing For Infrastructure Investment Roles, Interviewing For Infrastructure Investment Roles, Distressed publicly traded credit - case study help needed!, How would you approach a 4 hour case study?