Calculating cost of debt in LBO

Preparing an LBO for a PE firm and wanted to double check my cost of debt rationale.

Targeting a 60/40 debt/equity mix

Target Co to be acquired with 2 Term Loan B's

Term Loan B #1 cost of debt = Libor + (target co interest expense/target co debt)

  • Amortised evenly over life of loan

Term Loan B #2 cost of debt = Term Loan B #1 cost of debt + 300bps

  • Balloon payment at the end of the term

Comments (1)

Jan 15, 2022 - 2:25am

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