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Private Equity

Lecture 7 - 8: Valuation, LBO Model, Exit

Quiz covering LBO structure and lender protection, financial covenants, the maximum leverage exercise, dividend recaps, valuation methodologies and multiples, the LBO model build and returns breakdown, and exit routes.

Question 14 of 56

What is the key difference between contractual subordination and structural subordination of junior debt in an LBO legal structure?

Pick one: press 1-4 on your keyboard or click an option.
A

Contractual subordination eliminates the need for any security, while structural subordination requires double the equity

B

Structural subordination only applies to senior debt, while contractual subordination only applies to equity

C

Contractual subordination relies on an inter-creditor deed ranking creditors, while structural subordination places junior debt higher up the holding-company chain so it is structurally further from the operating assets

D

They are identical; the terms are interchangeable