Business LBO Analysis Assignment Help

Business LBO Analysis Assignment Help
Business LBO Analysis Assignment Help
1) Using the assumptions below, calculate ValueCo’s enterprise value and equity
purchase price
($ in millions)
Assumptions
LTM 9/30/2019 EBITDA $700.0
Entry EBITDA Multiple 8.0x
Total Debt 1,500.0
Cash and Cash Equivalents 250.0
a. Calculate enterprise value
_______________________________________________________________
b. Calculate equity purchase price
_______________________________________________________________
2) Using the enterprise value and equity purchase price determined in the prior
question, as well as the following assumptions, complete the sources and
uses table and answer the following questions (round numbers to nearest
decimal point)
($ in millions)
Assumptions
New Revolver Size (undrawn at close) $250.0
Senior Secured Leverage 4.0x
Total Leverage 5.2x
Equity Contribution 35.0%
Cash on Hand 250.0
Tender/Call Premiums* 20.0
Financing Fees 100.0
Other Fees and Expenses 30.0
*Assume ValueCo’s debt is fully refinanced
CHAPTER 5
170 CHAPTER 5 QUESTIONS
($ in millions)
Sources of Funds Uses of Funds
Revolving Credit Facility A) Purchase ValueCo Equity
Term Loan B B) Repay Existing Debt
Senior Notes C) Tender/Call Premiums
Equity Contribution D) Financing Fees
Cash on Hand Other Fees and Expenses
Total Sources E) Total Uses
a. Determine ValueCo’s pro forma revolver balance
_______________________________________________________________
b. Calculate the term loan B principal amount
_______________________________________________________________
c. Calculate the senior notes principal amount
_______________________________________________________________
d. Calculate the sponsor’s equity contribution
_______________________________________________________________
e. Determine the total sources amount
_______________________________________________________________
LBO Analysis 171
3) Given the sources and uses of funds determined in the prior question, as well
as the opening balance sheet below, complete the pro forma balance sheet at
closing and answer the related questions (showing all adjustments)
($ in millions)
Balance Sheet
Opening
2019
Adjustments Pro Forma
– 2019
Cash and Cash Equivalents $250.0
Accounts Receivable 450.0
Inventories 600.0
Prepaids and Other Current Assets 175.0
Total Current Assets $1,475.0 A)
Property, Plant and Equipment, net 2,500.0
Goodwill 1,000.0 B)
Intangible Assets 875.0
Other Assets 150.0
Deferred Financing Fees –
Total Assets $6,000.0 C)
Accounts Payable 215.0
Accrued Liabilities 275.0
Other Current Liabilities 100.0
Total Current Liabilities $590.0
Revolving Credit Facility –
Term Loan A –
Term Loan B –
Term Loan C –
Existing Term Loan 1,000.0
2nd Lien –
Senior Notes –
Existing Senior Notes 500.0
Senior Subordinated Notes –
Other Debt –
Deferred Income Taxes 300.0
Other Long-Term Liabilities 110.0
Total Liabilities $2,500.0 D)
Noncontrolling Interest –
Shareholders’ Equity 3,500.0
Total Shareholders’ Equity $3,500.0
Total Liabilities and Equity $6,000.0 E)
Balance Check 0.000 0.000
172 CHAPTER 5 QUESTIONS
a. Calculate ValueCo’s pro forma current assets balance
_______________________________________________________________
b. Calculate pro forma goodwill
_______________________________________________________________
c. Calculate pro forma total assets
_______________________________________________________________
d. Calculate pro forma total liabilities
_______________________________________________________________
e. Calculate pro forma shareholders’ equity
_______________________________________________________________
4) Using the LBO financing structure previously determined, as well as the
assumptions below, calculate ValueCo’s pro forma interest expense and
appropriate coverage and leverage ratios at transaction closing
($ in millions)
Assumptions
Commitment Fee on Unused Portion 50 bps
Administrative Agent Fee $150K
Revolver Pricing L 425 bps
Term Loan B Pricing L 425 bps
Senior Notes Coupon 8.0%
2019E Capex 157.5
Financing Fee Amortization 8 years
LBO Analysis 173
($ in millions)
Credit Statistics
LTM 9/30/2019 EBITDA $700.0
Interest Expense A)
Capex 157.5
EBITDA/Interest Expense B)
(EBITDA – Capex)/Interest Expense C)
Senior Secured Debt/EBITDA D)
Total Debt/EBITDA E)
a. Calculate ValueCo’s pro forma Year 1 interest expense
_______________________________________________________________
b. Calculate EBITDA-to-interest expense ratio
_______________________________________________________________
c. Calculate capex-adjusted coverage ratio
_______________________________________________________________
d. Calculate senior secured leverage ratio
_______________________________________________________________
e. Calculate total leverage ratio
_______________________________________________________________
174 CHAPTER 5 QUESTIONS
5) Using previous questions, the balance sheet data below and assuming 1%
per annum repayment on Term Loan B, complete ValueCo’s Year 1 cash
flow statement (assume all cash flow is used to repay debt) and answer the
related questions
($ in millions)
($ in millions)
Balance Sheet Data
2019 2020
Current Assets
Accounts Receivable 450.0 483.8
Inventories 600.0 645.0
Prepaids and Other Current Assets 175.0 188.1
Current Liabilities
Accounts Payable 215.0 231.1
Accrued Liabilities 275.0 295.6
Other Current Liabilities 100.0 107.5
Cash Flow Statement
2020
Operating Activities
Net Income $235.9
Plus: Depreciation 166.9
Plus: Amortization 55.6
Plus: Amortization of Financing Fees 14.0
Changes in Working Capital Items
(Inc.) / Dec. in Accounts Receivable A)
(Inc.) / Dec. in Inventories
(Inc.) / Dec. in Prepaid and Other Current Assets
Inc. / (Dec.) in Accounts Payable B)
Inc. / (Dec.) in Accrued Liabilities
Inc. / (Dec.) in Other Current Liabilities
(Inc.) / Dec. in Net Working Capital
Cash Flow from Operating Activities C)
Investing Activities
Capital Expenditures (166.9)
Cash Flow from Investing Activities ($166.9)
Financing Activities
Term Loan B D)
Cash Flow from Financing Activities
Excess Cash for the Period E)
Beginning Cash Balance
Ending Cash Balance
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