Hello everyone,
For LBO Models, say the origination date the company has an EBITDA of A and Adjusted EBITDA of B.
When determining the financing assumptions, we assume a 4x EBITDA on Term Loan; The 4 times should be based upon EBITDA or Adjusted EBITDA?
Thanks!
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Adjusted EBITDA, not the reported EBITDA, is what you typically base the leverage off of.
NTM Pro Forma Run-Rate Community Adj. EBITDA
Adam Neumann, is that you?
No way you are an analyst 2 in IB asking that question
I disagree with the poster above; the leverage docs I’ve negotiated were typically done on a LTM reported EBITDA basis. Usually, adjusted EBITDA is permitted for covenant testing (depending on how well the company is performing, what the leverage multiple is), but typical LBO financings are done off of reported EBITDA numbers.
Agree it’s typically done on LTM but you can for sure adjust the numbers. If you’re not then you’re missing a trick…
What size is your fund?
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