BUS 082 Lecture Notes - Lecture 18: Mezzanine Capital, Revolving Credit, Capital Structure
Document Summary
Debt typically comprised 60% to 70% of the financing structure. Due to high leverage associated with an lbo, the various debt components of the capital structure are usually deemed non-investment grade. Debt portion of the lbo financing structure may include a broad array of loans, securities, or other debt instruments with varying terms and conditions that appeal to different classes of investors. The total amount to be financed is the enterprise value (ev) of the target company. The financing structure is usually not related to the outstanding debt of the target company, which is refinanced once the transaction is closed: lbo financing is generally expressed in terms of debt-to-ebitda ratio. Bank debt is an integral part of the lbo financing structure, consistently serving as a substantial source of capital: typically comprised of a revolving credit facility) and one or more term loan (tl) tranches. Typically bears interest (payable on a quarterly basis) at a given benchmark rate.