Hi,
I am trying to do an LBO where there is a 5 year exit but the terms for the TLB, RCF and senior notes are 7 years. How do you model this out, would you just ignore the bullet payment meant for year 7, in your 5 year debt schedule? or would total repayment be in year 5 instead?
| +41 | What are you actually using AI for in PE? | 16 | 1h |
| +33 | Best industry/job for entrepreneurship? | 11 | 3d |
| +25 | Firm not transferring me to NYC | 13 | 1h |
| +24 | Laid off from MM PE - Seeking Help | 9 | 2h |
| +20 | Burn Out in PE - What Comes Next? | 3 | 4d |
| +15 | Buyside in London with nice WLB and pay | 15 | 1d |
| +12 | Value Creation Initiatives (That aren't add-ons) | 3 | 3d |
| +10 | Undergrad summer PE analyst positions | 3 | 5d |
| +9 | Question about HH 2028 | 2 | 4d |
| +9 | Realistic path to Capital Solutions/Spec Sits Groups from LevFin at a BB? | 1 | 2h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
If change of ownership in year 5 then model repayment in year 5
The debt gets taken out 99% of the time in a change of control
what others said
longer explanation is that credit financing agreements usually have a clause stating that if there's a change of control, they must be repaid in full
Here to offer lbo tutoring if you need
But you would still use the 7 years as the period to amort financing fees over , correct ?
Correct
As others have said, it amortizes based on its 7-year schedule, but in the event of an exit, the remaining principal balance at that time is repaid in full.
1) Use the 7 year term to amortize the financing fees
2) Model the debt payback normally, as if it was a 7 year loan
3) Repay all debt on the sale of the company
What happens to the 2 years of remaining unamortized financing fees? All recognized on P&L during change of control?
How is the amort of financing fees then treated in the three statement model, would it affect FCFF?
You can capitalize the financing the on the balance sheet, then amortize it.
Nam et nisi eos ullam adipisci eius pariatur. Adipisci quo modi ea et quibusdam ut sit. Consectetur mollitia quibusdam provident et voluptatum ipsam aspernatur rerum. Quo laborum rerum officia qui ea tempore.
Ut qui ipsum nihil totam praesentium laborum. Reiciendis quo et dolore similique. Et dolor quis neque dolorum iste voluptatem necessitatibus.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...