Leveraged Finance & Credit
Rank a standard LBO capital structure from cheapest to most expensive cost of capital, and explain why the ordering holds.
Model answer
Cheapest to most expensive: Revolver / TLA (senior secured, pro-rata) < TLB (senior secured, institutional) < Second lien (secured, junior) < Senior unsecured notes < Subordinated / mezzanine (incl.…
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More from Leveraged Finance & Credit
- A sponsor buys a company at 6.0x EBITDA of $200mm ($1.2bn EV). They want 4.0x total leverage. Sketch a plausible debt stack by tranche and the equity check.
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