I have encountered a problem with the equity waterfall test given to me recently. There are 6 fields I need to find out, the problem is two of the fields are the equity contribution of both the LP and GP. Is it possible to model an equity waterfall structure without knowing the equity contributions first? I've never heard of not being given the GP & LP capital contribution splits.
An expedient answer would be VERY helpful.
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Assuming no language to the contrary, when modeling out a waterfall, you treat all equity as the same (pari passu), so the split does not matter. All levered cash flow first goes to pay pref, then to return capital, then the promote split to the GP.
Thus, all equity (even the GP) equity earns the same return. Only difference is the GP also gets a promote "fee" on top of this. So all in all, the split should not matter.
The split is not something you can back into, or really should matter at all. If they are asking for you to provide it as an answer, that seems weird. Really just a set % that has no bearing on any of the calculations unless you are trying to determine the exact returns (profit, IRR, multiple).
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