Private Equity
Comprehensive exam-prep quiz covering leveraged finance: sources and uses of funds, management incentives and equity structuring, the leverage effect on EV and equity, key factors determining leverage, LBO debt structures, loan underwriting options, and loan agreements.
Question 4 of 50
Case
A PE fund is structuring an LBO. The Uses of Funds are: purchase of shares of €110.1m (6.0x EBITDA) and refinancing of target net debt of €86.0m (4.6x), giving an Enterprise Value of €196.1m (10.6x). Total transaction fees are €6.0m (0.3x), comprising investment bank fees, due diligence fees and debt arrangement/banking fees. The Sources of Funds are: senior debt split into Term Loan A of €18.5m, Term Loan B of €27.8m and Term Loan C of €27.8m; Mezzanine debt of €27.8m; and total equity of €100.4m. Total debt is €101.8m (5.5x EBITDA) and the deal totals €202.1m (10.9x).
Write your answer in your own words. It will be graded with Gemini.