Warrants in LBO modelling

Hi there, 

I am preparing for a LBO modelling test, i've seen assumptions for the mezzanine debt given as "20m with 12% intrest and +2% warrants".

Throughout the investment period, do these warrants affect the modelling at all (3 statements)? does it appear in the debt schedrule? or are they off BS items?

or is it at exit, when I am computing the sponsor equity that I need to remove the 2% of EqV, as In EgV to sponsor and managment =100%-2%, then assuming management equity of 3%, EqV of Sponsor will be 98%*95%*EqV at exit?

Grateful for any help!

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