Going from EBITDA to FCF - why is there "Cash Interest Expense" in addition to "Mandatory Debt Paydown"?

Hi folks,

I've been working through a few sample LBO models, including creating my own. In going from EBITDA to FCFE, there is a Mandatory Debt Paydown line item. However, I have seen some excel models include a Cash Interest Expense line item like screenshot below.

My question is - why is Cash Interest Expense included as an extra line item? I would have expected that your interest expense is included in the Mandatory Debt Paydown.

Is it assumed that Mandatory Debt Paydown is just applied to the principal of the loan and you are deducting the interest expense separately with this new line item?

 
Most Helpful

Yep. Cash interest expense is the interest paid on the loan. Mandatory debt paydown is the required principal payment and does not include any interest. FCF for voluntary debt paydown is the discretionary principal payment. You can see senior debt start at 3,000 and decrease by the mandatory paydown (300) and then discretionary paydown (1,196).

 

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