Waterfall Model - various types of Tiers
Hi guys,
I hope you can help me out. I need to build a waterfall model in which the LPs will contribute all capital to the fund and will receive a return of their investment along with a preferred return before the GP receives any incentive compensation.
Following the tiers:
1) 0.0% to the Manager and 100.0% to the Limited Partners until Limited Partners have received a 9.0% internal rate of return on their invested capital, net of distributions received as of such period;
2) 15.0% to the Manager and 85.0% to the Limited Partners until the Limited Partners have received a 14.0%
internal rate of return on their invested capital, net of distributions received as of such period;
3) 50.0% to the Manager and 50.0% to the Limited Partners until the Manager has received an amount equal to
15% of the fund level net profit through such period (as determined on a cash flow basis);
4) 15.0% to the Manager and 85.0% to the Limited Partners until the Limited Partners have received a 1.80X
equity multiple on total Limited Partner invested capital to date;
5) 100.0% to the Manager and 0.0% to the Limited Partners until the Manager has received an amount equal to
20.0% of the fund level net profit through such period (as determined on a cash flow basis), and thereafter;
6) 20.0% to the general partner and 80.0% to the capital contributing partners
1) seems pretty straight forward whereas I am already struggling with 2).
Any help much appreciated.
"1" = Tier 1 - Have All of LP Capital + 9% of accrued interest go to LP "2" = Tier 2 - After Tier 1 has been distributed to, calculate a 14% accrued interest to the LP Capital contributed. Following the 9% of accrued interest paid out to the LP in Tier 1, have the remainder of Tier 2 accrued interest - meaning 14% accrued less 9% accrued interest - go to the GP / LP at the split of 15% and 85%.
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