How to treat long-term Notes Payable in an LBO?
Hi everyone, thank you in advance for the help with this question.
I am in the middle of an LBO model test, and Notes Payable is a large portion (~25%) of long-term liabilities. Curious if I should i) leave this figure as is for the projection period (and maybe sum into 'Other Non-Current Liabilities'), ii) allocate a % of Notes Payable to current liabilities each year, or iii) assume an interest % for the notes payable and integrate into my current debt schedule?
Nowhere in the prompt is this addressed, but as this is a large % of the debt cap table, I hesitate to leave it unaddressed.
Is the balance sheet otherwise cash-free/debt-free? I'll suspect not. I would assume this is a debt/debt-like item that would be zeroed at close and paid off by the sellers (via their proceeds). If that doesn't seem to make sense based on how the exercise is structured, I'd probably just hold flat on the BS.
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