Preparing an LBO for a PE firm and wanted to double check my cost of debt rationale.
Targeting a 60/40 debt/equity mix
Target Co to be acquired with 2 Term Loan B's
Term Loan B #1 cost of debt = Libor + (target co interest expense/target co debt)
- Amortised evenly over life of loan
Term Loan B #2 cost of debt = Term Loan B #1 cost of debt + 300bps
- Balloon payment at the end of the term
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