Leveraged Finance & Credit
A TLB has a maximum first-lien net leverage covenant of 6.5x. The model shows $780mm first-lien debt, $30mm cash, $120mm EBITDA. Is the borrower in compliance, and what is the EBITDA cushion?
Model answer
First-lien net debt = $780mm − $30mm cash = $750mm. First-lien net leverage = $750mm / $120mm = 6.25x, which is below the 6.5x cap, so the borrower is in compliance. Cushion to breach: EBITDA can…
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