2002 Capital Update
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Transcript of 2002 Capital Update
2002 Capital Update
Buying and Selling a Company
in a Tough Economy
July 17, 2002
Anderson School at
UCLA
Los Angeles, CA
Debt Structure and Funding
Typical Capital Structure:
EBITDA $ 25 million
Purchase price - 7 times EBITDA $175 million
ABL or Cash Flow Financing $ 50 million
Tranche B Lenders $ 25 million
Equity or Mezzanine $100 million
Debt Structure & Funding
Lack of access to senior debt on a cash flow basis.
Cash flow lenders are offering 2 to 3 times EBITDA.
Sellers seeking 6 to 8 times EBITDA.
ABL lenders: Aggressively offering financing
Often financing ends up at 2-3 times EBITDA.
Financial sponsors are forced to invest 4-6 times EBITDA
Capital Summary
Senior Debt Leverage is Down
Senior Debt Pricing is Up
Equity Investments are Up
High Yield Market is Red Hot
Distressed Debt Market is Red Hot
Due Diligence is Critical
Vicky Balmot
Executive Vice President
Congress Financial Corporation
a Wachovia Company
626-304-4972
email: [email protected]
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