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					    Financing a Leveraged Buyout



1   Cost of the deal
2   Borrowing capacity
3   Capital structure
4   LBO cash flows
Estimating cost of deal

Shares                                  10
Price                         $        45
Premium                               15%
Equity cost                   $       518
Debt cost                         $    55
Fees                       5% $        26
Capex & restructuring     10% $        57
Total cost of deal            $       656
Estimating borrowing capacity

Given:
EBIT                    $         95
Min EBIT int coverage ratio       1.3
Interest capacity       $         73
Interest rate                 16.00%
Debt capacity           $        457
Preliminary capital structure

Debt                   $   457
Missing                $   174
Mgt equity             $    25
Total financing        $   656
Cash Flows and debt repayment
Year:                       0        1     2
EBIT                          $   110    117
Borrowed         $       437
Interest                           61     53
Tax                      35%       17     22
Add depr - Capex                    30     30
Cash avail to repay debt           62     72
Remaining debt                    375    304



Returns
                           0        1      2
IPO @ 6xEBIT
VCs take               (135)        0      0
Managers     $          (15)        0      0
IRR                     40%
  3      4      5
124    131    135

 43     31     18
 28     35     41
  30     30     30
 83     95    106
221    126     20




  3      4      5
              810
  0      0    729
  0      0     81

				
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posted:11/14/2010
language:English
pages:6
Description: Lbo Spreadsheet document sample