Unfunded Revolver Revolver still available (ie hasnt been taken out)
OID Discount on debt so OID= (100-price)/100*FV
it means that to buy $100 of Face Value of the Term Loan, lenders would only have to give us $99 in cash. This $1 difference is amortized over time or when the loan is repaid
BOP ...
LBOs Practice Exam Questions and
Correct Answers
Unfunded Revolver ✅Revolver still available (ie hasnt been taken out)
OID ✅Discount on debt so OID= (100-price)/100*FV
it means that to buy $100 of Face Value of the Term Loan, lenders would only have to
give us $99 in cash. This $1 difference is amortized over time or when the loan is repaid
BOP Book = BOP Face value - BOP OID. EOP Book = EOP
Face value - EOP OID.o Year 1 BOP OID is calculated from the capital structure as
Face Value * (100 - Price) / 100.
OID is recognized in two situations: amortization and recognition. OID amortization=
BOP OID Balance/yrs remaining on loan
OID recognized in repayment=
LIBOR ✅Cash interest rate. bps= %*10,000
Employee Stock Options ✅If old E> strike price then own 5/105 of company * old E
Strike price= old E
Refinancing ✅Recalculate debt by EBITDA (t-1)*Multiple
✅BOP Undrawn Capacity = Total Capacity ($100M) - BOP Balance; EOP Undrawn
Capacity = Total Capacity ($100M) - EOP Balance.
The logic for the (Payment) / Drawdown line is a bit more complex. If CF is negative and
we have capacity in the Revolver, we want to draw it down as necessary. If we have a
balance on the Revolver and positive CF, we want to repay the Revolver as much as we
can
Gross PP&E Y1 ✅=Gross PP&E Y0 + Capex Y1 (bc ur spending=value adding to
company)
Accumulated Depreciation Year 1 ✅Accumulated Depreciation
Year 0 + Plant Depreciation Year 1 + Maintenance Depreciation
Year 1.
Net PP&E ✅Gross PP&E - Accumulated Depreciation.
Retained Earnings Year 1 ✅Retained Earnings Year 0 + Net
Income Year 1 (there are no dividends here).
Paid In Capital Year 1 ✅Paid In Capital Year 0 + Shares Issued *
Par Value of Shares.
Par Value= Sponsorship E @ beg/SO
,Shares Issued will come both from the IPO and from management's options.
o Par Value of Shares will be equal to Sponsor Equity Value /
Shares Outstanding at the time of the initial deal (here
$4.45).
Capital In Excess of Par Value Year 1 ✅Capital In Excess of Par
Value Year 0 + CF from Stock Issuance Year 1 - (Paid In Capital Year 1 - Paid In
Capital Year 0).
Capital in Excess of PAr Value Y0= set to 0 if assume all shares were issues @ par.
This + PIC has to = SPonsor Equity
Call Premium ✅$$ given to investors when debt is called earlier
Leverage/Coverage covenan ✅Min leverage ratio or min interest coverage ratio
Cushion= EBITDA/Net Debt/(covenant Net Debt/Ebitda)-1
MOIC ✅Equity gained/equity commited
IF mgmt put in part of Equity, have to take that % out of equity gained @ end
IRR ✅MOIC^(1/5)-1
EBT ✅`
Call Premium/Div Recap after yr 3 ✅This means REFINANCE beg of yr 4 using Yr 3
EBITDA*Debt Multiples
Div Recap CFs in Returns Calculation:
Debt Raised
-Debt Repaid
-Call Premium on Sr notes
*How is this a Div recap
Cash from mgmt options ✅Mgmt option % * (Sponsor Equity y0 - Div payment y3)
WHY!??!
NOL ✅If have NOL, dont pay tax for the year and can get a REFUND for previous 2
years tax
NOL affects TAXES= (EBT-NOL Recognized)*t
, instead of just EBT*t. Doesnt affect IS in any other way
Employee Stock Option ✅Are CALLS= right to purchase
# shares repurchased - shares issued = Net FD shares
LEARN HOW AN OID FLOWS THROUGH AN LBO ✅
Non Cash interest ✅OID amortization + OID recognition in repayment + PIK interest
Call Fee ✅Paydown*((Call Premium-100)/100)
Management Rollover ✅Management rolls over equity & contributes to new
Rollover % * Existing equity value`
Cash Sweep? ✅
Each answer should be <1 min ✅
Do you plan on going to business school? Why or why not? ✅You'd like to attend only
if it teaches you skills that help you advance in your career.
Who else are you interviewing with/Where are you in the process with other firms?
✅can be a feeler as to how desirable you are. If many notable firms are interviewing
you, they feel reassured that you are a qualified candidate. Also, having multiple offers
gives them a sense of urgency that you're so good you'll get scooped up by someone
else if they don't give you an offer soon.
What in particular is attractive about this firm? ✅
Why did you choose the firm you are at now/Why did you chose your
group/sector/product/Why did you choose your college? ✅
What qualities/skills do you feel you have that are transferable to this industry? ✅
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller twishfrancis. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $14.99. You're not tied to anything after your purchase.
