I've seen numerous LBO models (built for instruction) that take the book value of debt for the "refinance debt" part of the "Uses" table (meaning it just pulls the debt figure off the target balance sheet). Is this the most accurate way to do it, or should it technically be using the principal amount of debt? For example, the book value of debt might be $95m while the principal value is $100m.
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Principal, as that’s what you’d pay off. Book value is principal netted against things like unamortized issuance fees
Interned at a BB and we used Principal. When you pull off directly from balance sheet you may be missing certain covenants or special situations such as convertible instruments, tax deductions and amortized fees you need to add back.
Look up their 10k and 10Q on BamSec and use their principal amount.
Hope this helps !
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