Mandatory/Optional repayment for PE Case Study
Hey guys so I am studying for a case study I have coming up and was just doing some practice case studies.
So we just have 1 tranche of debt - so we have beginning balance of debt less mandatory and optional debt repayment equals end balance of debt for each year.
So say mandatory repayment is 1% of the beginning debt balance that year. The optional debt repayment assuming we have a 'cash sweep' (using excess FCF to pay down debt) should be the FCF less the mandatory debt repayment right? Meaning the mandatory debt repayment is coming out of our FCF, correct? I was reviewing a friend's model and he didn't do that, but that would mean that Mandatory + Optional Debt Repayment is greater than our FCF (leading to negative FCF which I don't think is what we want). Hopefully this makes sense, thank you in advance!
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