BX/CVENT - Debt levels in current PE deals
Just noticed that the deal is financed with only ~20% debt ($900mm TL on $4.6bn deal). Curious, I get that it’s a tough market, but wondering what’s the current norm on level of debt and type of instruments? Are you seeing more of Mezz debt or Pref equity?
Hey Associate 2 in IB - Cov, I'm the WSO Monkey Bot...do any of these help:
More suggestions...
I hope those threads give you a bit more insight.
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Blimp
https://m.economictimes.com/news/international/business/banking-turmoil…
According to the article, PEs are open to financing completely with equity to close the deal and add debt later and take the money out as dividends.
Just thought I’d share the latest strategy employed by PEs.
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I know of at least three deals that are going to be closed by the end of Q1 2024 with 40-50% debt. Granted, they are in the infra space where the maths do be mathing
Generally speaking, Leverage levels above 5x in this rate environment (depending on capex needs) don't work when SOFR is 5%+. The result is less levered companies - have also seen sponsors raising some PIK Pref in order to solve for another 1-2x in what would have been debt ~2 years ago.
The $900MM in debt for BX/CVENT is actually decently levered - the EBITDA is like 30%+ PF run rate cost savings (i.e., not "real" EBITDA) and other bullshit addbacks - when you exclude this, leverage is notably higher (~6x)... So more so than the debt piece being "small", the equity check is just large because of the large purchase price multiples.
Tks, fair point on leverage esp for a software business. what’s the PIK rate like currently? (Cash and non cash) is that on top of SOFR
Also noticed vista is rolling over for non convert preferred equity with liquidation preference, what could be their rate?
I have never modelled for it in a LBO but assume that it works similar to PIK in that the interest keeps accumulating on the FV of the instrument and is paid out 1st at the time of exit event
What does PIK pref look like? Is that just equity that on the downside is a PIK bond but on the upside is equity that's limited up to a certain point?
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