Hi guys,
When doing LBO models for companies with capital leases, do you include capital lease interest expense as interest expense when calculating credit ratios?
If one treats “capital lease rolled” as debt assumed, should the lease expense be included in Ebitda or interest expense then?
Thank you
If you capitalize the lease, then the resulting interest expense needs to be included in your ratios calculation. Both the associated depreciation and interest expense will be below EBITDA and you will need to add back the original rent.
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