Capital Structure (LBO) Modeling
Incorporate a complex capital structure so the model can be used for credit purposes or LBO analysis
This hands-on course focuses on the skills required to build and incorporate a complex capital structure into a financial model. Participants will recapitalize a company’s balance sheet and then forecast specific pieces of debt and equity so that the model can be used for credit purposes or as a Leveraged Buyout (“LBO”) model.
This course builds on Building a Financial Model of a Company, so participants may want to complete that course prior to taking the Capital Structure (LBO) Modeling session.
1 – 2 days, depending on the amount of material to be covered
Incorporate an Acquisition or Financing into a Model
- Build a Sources and Uses schedule within a model
- Incorporate all fees incurred with the transaction
- Recapitalize a company’s balance sheet
Forecast Debt and Equity
- Properly incorporate Senior Term Debt with an amortizing repayment schedule
- Create a robust bank operating line (or revolving credit facility) with a cash sweep
- Incorporate variable interest rates in which the spread is dependent on the company’s leverage
- Calculate a stand-by fee on the undrawn portion of the bank operating line
- Utilize a margining formula to monitor the size of a company’s bank operating line
- Incorporate Subordinated High Yield or Mezzanine Debt
- Build a provision for non-cash Payment in Kind (PIK) interest on various pieces of debt
- Create a well-designed shareholders’ equity schedule
- Properly link the debt and equity schedules into the financial statements and balance the company’s balance sheet
- Understand the need for circularity within a model
- Make a model iterative by incorporating circular references
- Learn to create a “circular reference breaker” to rid a model of undesirable error messages when the model crashes
Analyze Investor’s Expectations
- Properly calculate the investor’s internal rate of return
- Understand and incorporate operating and debt ratios
- Include debt ratios in which the covenant tightens each year
- Create “flags” to warn if a debt covenant has been tripped
Upcoming Capital Structure (LBO) Modeling EventsAll Events
This hands‐on course focuses on the skills required to build and incorporate a complex capital a a ...
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