Revolver Commitment versus EBITDA multiple

Recently saw a case study where the EBITDA multiple on the revolver was .5x LTM EBITDA, the commitment was $500 and the LTM EBITDA was $500. I would've assumed the ebitda multiple refered to the same thing as commitment - can anyone shed light on why there would be this difference and what it means?

 
Most Helpful

How about this logic: Revolver = max (commitment, 0.5x LTM EBITDA)

  • Commitment is $500 (i.e. maximum the business can ever draw)
  • You can borrow up to 0.5x LTM EBITDA at any given time
  • If your EBITDA is $500, then you can draw $250
  • You must be a growing business because commitment exceeds current 0.5x LTM EBITDA
  • If your EBITDA is $600 next year, then you can draw $300 .......
  • If your EBITDA grows to $1000, then you can draw $500
  • If your EBITDA grows to $1200, then you can still draw only $500 because the total commitment amount is your ceiling

Good luck,

Tamara

 

Yes, would be very odd to have a revolver in an LBO which essentially has an EBITDA grower basket linked to it. It would be difficult for the RCF lenders to book the committed debt (which would fluctuate, what, quarterly?). You occasionally see situations where a hollow tranche is built in for an additional RCF (or some other form of undrawn committed debt like a CapEx Facility) which is triggered by some milestone (e.g. an acquisition, surpassing X EBITDA etc).

More likely the case example wasn’t using precise terminology as another poster alluded to. RCFs on LBOs are usually set at one turn of EBITDA. The undrawn commitment is the amount of available RCF for drawing. Total Commitments is the sum of undrawn and drawn RCF.

Career Advancement Opportunities

March 2024 Private Equity

  • The Riverside Company 99.5%
  • Warburg Pincus 99.0%
  • Blackstone Group 98.4%
  • KKR (Kohlberg Kravis Roberts) 97.9%
  • Bain Capital 97.4%

Overall Employee Satisfaction

March 2024 Private Equity

  • The Riverside Company 99.5%
  • Blackstone Group 98.9%
  • KKR (Kohlberg Kravis Roberts) 98.4%
  • Ardian 97.9%
  • Bain Capital 97.4%

Professional Growth Opportunities

March 2024 Private Equity

  • The Riverside Company 99.5%
  • Bain Capital 99.0%
  • Blackstone Group 98.4%
  • Warburg Pincus 97.9%
  • Starwood Capital Group 97.4%

Total Avg Compensation

March 2024 Private Equity

  • Principal (9) $653
  • Director/MD (21) $586
  • Vice President (92) $362
  • 3rd+ Year Associate (89) $280
  • 2nd Year Associate (204) $268
  • 1st Year Associate (386) $229
  • 3rd+ Year Analyst (28) $157
  • 2nd Year Analyst (83) $134
  • 1st Year Analyst (246) $122
  • Intern/Summer Associate (32) $82
  • Intern/Summer Analyst (313) $59
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
dosk17's picture
dosk17
98.9
6
DrApeman's picture
DrApeman
98.9
7
kanon's picture
kanon
98.9
8
CompBanker's picture
CompBanker
98.9
9
GameTheory's picture
GameTheory
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”