FCF - Term Loan A vs Term Loan B
I was recently in an interview and asked to calculate the PF free cash flow in the following scenario.
Acquisition Scenario and Assumptions
- EBIT: $40mm
- D&A：$ 10mm
- 资本支出：$ 10mm
- Change in Working Capital: $0
- Tax Rate: 40%
- Transaction Multiple: 5.0xEBITDA（假设没有现金或债务交易）
- Debt: $150mm (based on transaction multiple and 40% equity check), 100% bank debt, split between Term Loan A and Term Loan B
- Term Loan A: $75mm, 8% cost of debt, amortizes over 10 years
- Term Loan B: $75mm, 10% cost of debt
- Financing Fees: 2.5%, amortized over 10 years
计算ulate Pro Forma Free Cash Flow with Term Loan A and Term Loan B
There are a couple of ways to approach this scenario, from an operational or investor perspective. In an interview, be sure to explain which the rationale for your approach as you are walking the interviewer through your response. The answer below uses an operational approach.
-
EBITDA: 50mm
-D＆A：10mm
- Financing Fees Amort: .375mm
= EBIT: 39.625mm
- IntExp Term Loan A: 6mm
-INTEAPT期限贷款B：7.5mm
= EBT: 26.125mm
- Taxes: 10.45mm
= Net Income: 15.675mm
-
Net Income: 15.675mm
+ D&A: 10mm
+ FinFeeAmort: 0.375mm
+ NWC: 0mm
- 资本支出：10mm
-TLA Amort：7.5mm
- TLB Amort: 0mm
= FCF：8.55mm
Learn More AboutLBOsandFCF
- Annual Amortization of a Term Loan
- 什么是杠杆收购？
- FCF计算差异
- Difference BetweenLBOandDCF
- 杠杆vs UnleveredFCFforDCF
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Comments (51)
I caught one thing: the financing fee would be $6.25mm (2.5% x $250mm purchase price), or $0.625mm per year amortizataion. (PP calc = $50mmEBITDA* 5x multiple = $250mm)
运营的现金流（经营现金）
- Capital Expenditures
= Free Cash Flow
分解更多是
净收入 + D＆A +/- WC的变化
- Capital Expenditures
= Free Cash Flow
EBIT- $40.0mm - Interest Expense from Term Loan A - $6.0mm - Interest Expense from Term Loan B - $7.5mm EBT - $26.5mm - Taxes $10.6 Net Income $15.9 + D&A - $10.0mm + Amortization from Financing Fees - $0.625mm - Amortization of Term Loan A - $7.5mm - Capex - $10.0mm
- Change in WC - $0.0mm
FCF= $7.775mm
Bumping an old post - but since this is pinned and nobody has corrected it... want to call out that this is wrong.
Financing fee is NOT transaction fee. It applies as a % of debt only. The answer in the question is right
Want to break into IB? Call the MD ofLBOs- said a finance professor one time, long ago
鉴于（我们假设）公司的运营以及收入和运营费用，还要达到790万美元，保持不变吗？
I think you're confusing http://en.wikipedia.org/wiki/Amortization_(business)
with
http://en.wikipedia.org/wiki/amortization_(Business)#Accounting
why are you guys adding back the Term A Loan Amortization - it doesn't hit the IS - it should be deducted
Actually, you don't add the TLA amortization to EBIT to getEBITDA. Amortization in the non-cash sense is quite different form Debt amortization, which is mandatory and must be paid in cash.
EBITDA: 50mm-D＆A：10mm-Financing Fees Amort: .375mmEBIT：39.625mm-IntExp A: 6mm-IntExp B: 7.5mmEBT：26.125mm-Taxes: 10.45mmNet Income: 15.675mm
FCF计算
Net Income: 15.675mm+D&A: 10mm+Finfeeamort：0.375mm+NWC: 0mm-Capex: 10mm-tla Amort：7.5mm
-TLB Amort: 0mm
8.55 =FCF
why is TLA amortization not just added to TLA Interest (ie making it $13.5m)? I'm sure you're right I'm just curious about this.
Interest is tax-deductible, mandatory amortization is not.
Also for ibanker26 and welldawg08 how can you guys (apparently) work inIBDand Private Equity and get this stuff so wrong?
同意上述海报 - 这是一些非常基本的东西
因为我在10秒内写下了答案，没有太多思考。我有真正的工作要做，然后整天都在评论Peep的错误
小点...我从EBIT开始计算FCFin anLBOas you sometimes have PIK interest which NI includes as well
PIK兴趣作为非现金费用添加回CF语句
我的答案：EBITDA: 50 - D&A: 10 - Amortized Financing Fee: 1502.5%/100 = 0.375 EBIT: 39.625 - Interest:758% + 7510% = 13.5 Pretax Income:26.125 Net Income:26.125(1-0.4)=15.675 +D&A+Amortized Finance Fee: 10.375 +NWC：0-资本支出：10-强制债务还款A：7.5FCF: 8.55
I'm shocked at the above answers. So much so, that I actually took the time out below to calculate it.
EBIT 40 D＆A 10 CAPEX 10税40％
TEV Multiple 5xEV$250 Amort/yr $.375
杠杆FCF:
EBIT40
- Taxes (24) +D&A 10 -Capex (10) -WC 0 - Int Exp - TL A (6) - Int Exp - TL B (7.5) + Amort Fin Fees 0.375 = LevFCF2.9
You add back amort of financing fees, as this an expense.
Not sure I would add back the Amort of Fin Fees. You add back the 10 of D&A because its baked into the EBIT number but is a non cash expense. The .375 of financing fees is a non-cash expense, but I don't think it is incorporated into that EBIT number. I guess there is a tax shield component here, so you could add back the .375 * 40%.
另外，如果我看着杠杆自由现金流我不应该包括债务中的税保护吗？因此，减去受税收有效的净利息费用而不是总数？
通常，如果要求我计算自由现金流，我会坚持没有杠杆。从那里，您可以进行所需的任何调整（受税收于利息费用，强制性债务Amort），以获得“可选债务摊销能力”的数字，这实际上是您的PF LFCF
Amort of financing fees is not included in the D&A number calculation - this is why capex and D&A are identical.
I don't know what the hell you mean by tax shield from debt...did you mean D&A? If so, I am recognizing my tax shield.
我们正在看杠杆FCF因为我们正在尝试确定debt现金流量。IRRis based off these type of cash flows.
My calculation above is correct. Once again, I'm shocked by the responses above and the misinformation on this website.
Yes, some of the answers here are shockingly bad.
贷款Amort应该不是从中减去FCF. This is cash that is creating equity, same as a dividend.
恩，那就对了。
@"johnny_quest" is remarkably incorrect for somebody who is so "shocked by the above answers". The 8.55 figure that @"Jeremystory" and @"curiousmonkey" arrived at seems correct to me.
Johnny_quest, the financing fees are separate from the $10 of D&A so ebit needs to be recalculated. The taxes are wrong - incorrect tax rate first of all as pointed out already, and then you didn't use the int exp as a tax shield. Also, the amortization of TLA affects leveredFCF而且您不考虑这一点。
No, because the TLA amort creates equity.
我认为这是不对的。如果这是强制性的债务付款，无论是“创造股权”，它还是所需的现金流量。如果公司无法付款，则可能会违约。可选的债务还款将是另一个故事。
so wrong. just so wrong...
@"johnny_quest" pleasetake a modeling course或者其他的东西。您无法运行LBOis rivaled only by your unjustified arrogance.
杜德，将您的他妈的头从屁股中的他妈的公式中拉出，并试图理解FCFisn't just a number but represents THE VALUE FOR EQUITY HOLDERS GENERATED BY A COMPANY'S OPERATIONS. You are totally clueless if you can't tell the difference between interest expense, which is value that leaves the company, and loan amortization.
I'm telling you how an investor would look at it, not how your stupid canned banking models defines it. Now, I work in distressed so I can see why anLBO盖伊会关心预付付款，但我认为您不在公式之外考虑过。
什么? !是的我在pos翻转税收不正确t which was flagged earlier. This was a copy and paste error while I was transferring my numbers from my quick excel workbook - not a conceptual misunderstanding.
Taxes are based on EBIT. To get toFCF, you subtract int expense. "Your comment about int expense as a tax shield" is invalid here - this applies when we're trying to compute Net Income (e.g. we apply taxes to PBT).
$8.55 is not the correct answer. $10.9mm is the right answer.
该公司将获得税收优惠，因此将减少其现金流出基础的税收负担。离开公司的实际现金将是税收调整的利息费用，因此fcfcalculation needs to take that into consideration. Under you scenario that firm would have ~2.5mm in extra cash that you aren't accounting for.
taxes should be based off of EBT to get tonet income.
然后从净收入开始以增加税款。然后添加D＆A，鳍，减去强制性债务还款等，以获取LFCF。
a minor but small distinction. if you take taxes off of EBIT you overstate taxes.
这是一个有趣的线程。使看到谁实际工作变得非常容易PE.
+1
Sigh. I'm not going to start a monkey s**t throwing contest as you guys tried to (although I'm realizing I've definitely got enough credits to make it interesting), but this is insane.
这意味着不应在杠杆中考虑强制债务还款FCFis absurd. Mandatory debt repayments are, by their nature, outflows of cash that the equity investor will therefore not see. Yes, of course it increases the equity stake, but that value will be realized when they cash out a larger portion at the sale. To not realize that thePEfirm will get less cash during their holding period based on mandatory debt repayments is not looking at this from "an investor's perspective" - it is just ignoring multi million dollar cash outflows.
As for the distressed perspective brought up by mrb87, I can see how maybe you wouldn't account for mandatory debt repayments, if you feel that you'll be restructuring the debt or something like that. But this seems like a cut and dryLBO面试问题。当未分配时PEfirms have to pay out millions of dollars to creditors instead of pocketing it, they tend to care and throw it in their models....
仅供参考 - 是的，正如指出的那样，我是一名传入分析师。我也有FOinternship spanning IB,HFandPE(3 in PE).
Things are getting heated up in herrr...
I think @"ayoayo" was correct based on the definition of LFCF. Johnny and mrb are looking at this from a different perspective, but in practice they aren't wrong. The way the original question/post was worded, each could be a valid answer IMO.
In anLBO, you have two lines that you care about:
1) cash flow available (needed) before principal payments 2) cash flow available (needed) after mandatory amort
I've never seen anyone use theUFCFor LFCF terms in the real world.
Spot on as usual @"peinvestor2012" with regards to the two CF lines. SB'ed.
当我想到真的自由现金流", I think of your '2)', as specified above, as it takes into account all aspects of the leverage. Labeling it LFCF if you are arriving at the 'cash flow available(needed) before principal payments' line doesn't seem fitting imo.
It's funny how you say "spot on", when you repudiated everything I just said which is expressed in point #1, and told me to take anode long course.
鉴于您是新手，如果您是赞助商，我们从投资者的角度使用＃1，因为定价和债务量子会根据什么而有所不同Term Sheetswe"ll receive from banks.
Also, you won't see TL A's often, unless it's a unitranche format. You perhaps don't know this, but the TL b won't amortize if there is a TL A senior to it.
One recommendation, I'd like to make as you begin your banking experience, is to stay humble and don't act like you know everything especially with the "dense" internship experience you had inHFandPE（这基本上意味着您采购的交易并进行了猴子的工作）。
I think you have a head on your shoulders, but just need to fix that attitude and stop trying to use your academic and pedantic approach to justify that others are wrong.
Bankers look at things a different than an investor does - academics won't teach you that; listening to what other folks are saying and reasons for them will go a long way for u.
归根结底，没有“正确”的答案。这个线程有些失控。我敢肯定，JQ和MRB知道他们在说什么，并从他们的过滤器以及如何接受投资者培训。另外，如果您谈论的是实际现金流出和定义，则NT和AY是正确的LFCF. It's really just semantics.
I think it would be helpful for everyone to not just state your answer and that someone is wrong but rather state your rationale so people can learn something from one another.
Am I missing something, or shouldnt the debt be 120 and not 150? A 5xebitdamultiple means offer value of 200, and if equity is only 40%...
Edit: nvm, 40 was ebit
我有一个问题，摊销融资成本不是作为利息费用的一部分吗？（也就是说，我认为EBIT不包括摊销的融资成本）
无论您是否必须增加融资成本，这只会改变。
Dude - loan amortization is principal repayment (paying back the debt owed), not like D&A even though it's using the same word ("Amortization").
Debt repayment goes in thestatement of cash flows.
Only piece of debt that shows up in the损益表是净的Interest Expense
Exactly, there seems to be some confusion about the word "amortzation" here. Don't mix up 1) loan amortization = principal repayment = a cash outflow in theCFS2）资本化融资费用的摊销（资产负债表上以正常方式摊销的资产）= i/s的费用=添加添加CFS
定期贷款的回报率b(Originally Posted: 10/28/2013)
Can anyone shed some light on this process? New to this kind of debt. Say you hypothetically committ $100MM on a 7-year $500MM TLB issued at 99%. Annual amortization 100bps of face value, priced on a 350+450 LIBOR spread. How shouuld I be thinking about this? Any significant variables I'm excluding (besides risk)?
Risk is a pretty big one. Like LIBOR floor is one (don't really know what it is one of, since i'm not sure what we're looking for here.....). But thinking about what? If I'm thinking about putting $100m out the door, risk is definitively going to be up there.
在您所看的内容方面要更具体，然后我们将能够在更大程度上为您提供帮助。您是否在乎盟约，文档所写的法律，白色列表和互管理者？
In reality everything in a loan doc is driven by the company itself, its operations and risk.
Not worried about the risk, covenants (covenant lite), etc. regarding this hypothetical security. LIBOR floor 100bps, initial cash flow sweep provision of 75%, 101% softcall year 1 (re-pricings). I really just want some color on calculating and thinking through the return. i.e. why do it, how much money is to be made? Much apprecaited. If I don't have enough info. than this thread can just be disregarded, like I said pretty new to this.
You should never be thinking about return without thinking about risk.
It's a floating rate security so you need to think about yourLIBORto arrive at a return. You need to think if it will be refi'd early, yourcost of capitaletc....Are you asking how to calculate? It doesn't seem so, which means you have to look at the risk. Otherwise we'd all be buying paper trading at $0.03
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