Any good resources for modeling A/B notes?
Have to do my first A / B note deal. Does anyone know of any video resources or anything that could possibly give me better guidance on how to model this? Thanks!
Trending Content - Real Estate Forum
Career Resources
Unfortunately haven't worked on one myself here but I'd be interested in finding out where you end up / if you find any good resources
Modeling it from a lenders or owners perspective?
There’s really not much to model. Pay the A note its preferred yield and let the B note keep the rest.
I guess you can run models on if things don’t go as planned to get an idea of your “worst case scenario” return.
From the owner’s perspective, shouldn’t it just be modeled as one senior loan? Just show the blended rate. If not, what specifically did you mean?
Yeah it’s basically the same as just one senior loan. However, the Owner pays A note interest through term and B note (aka hope note) interest would be PIKd. Everything is than paid off at capital event; payment priority depends on waterfall structure which is negotiated in loan docs. With A/b note structure, there is also typically additional equity that would come into play either in the form of preferred or common equity.
I dont think this is always the case where the B-Note is accruing interest though. I believe (and have worked on loans) where the B-note eventually just gets paid their interest rate with no PIK / accrual component.
Consequatur magni sapiente necessitatibus necessitatibus. Autem cum quis et ut id. Impedit vel reprehenderit nobis aut.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...