LBO - Repayment of Debt
Just a quick question about the value of repaying debt; wanted to make sure my logic was correct. This is the way I'm thinking about it:
Conceptually, if you have a certain amount of cash (let's say x) on the, it makes more sense to use that cash to pay down debt because if you pay down debt, your interest expenses will go down, which increases increases cash flows. With this additional cash, you can repay even more debt, which drives net debt down by even more. So your net debt is down by x + a little extra. If you were just to hold on to that cash, net debt would just go down by x. So your overall equity return is higher if you pay down debt rather than if you just held on to that cash.
Is this correct? Are there any other aspects I'm missing with regards to the value of debt repayment?