Hi there,
I am currently looking to build a LBO financial model with a Term Loan but also put in place an RCF to be drawn if CFADS is negative.
The problem is that I would like this RCF to draw debt without outpassing a reference leverage to be respected along the tenor of the financing (5 years), i.e. max 6x Net debt leverage.
How would you model it in Excel ?
Thank you in advance !
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Calculate the implied max leverage (based on 6x) possible, calculate the delta between current net debt and the implied max leverage and, subsequently, implement a MIN function to calculate the max the revolver can draw. Keep in mind though, if there is indeed a covenant which limits debt at 6x, to build in a reference that notifies you that covenants are not met during that specific year. Hope this helps.
Thank you for your reply.
I have the max leverage calculated and the delta and MIN function.
The problem is the covenant to be respected (for instance 6x). I cannot manage to make my RCF draw debt (only if my CFADS is negative) until reaching 6x leverage and not more. The delta would be filled in with Equity if Cash would still be negative after drawing RCF until 6x leverage.
Have you tried a line item with max revolver draw limit based on PF debt is drawn? Then if there’s additional need for cash if you’ve maxed the revolver you can can assume an equity infusion.
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