Structuring Leveraged & Mezzanine Finance
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Description
An intensive, 3-day programme, featuring: Identifying suitable LBO candidates. Understanding LBO structuring. Analysis of the debt structure including documentation. Use of Holdcos and Opcos. Addressing financial assistance. Modelling the cash flows. Computing the credit ratios. Mezzanine and non-senior debt financing, warrant calculation. Other hybrid instruments such as Holdco PIKS. Senior debt structure: margin grid, loan life, sweep, working capital clean down. Whole business securitisation. Aims and Objectives The aim of this course is to provide participants with exposure to leveraged and mezzanine financing techniques in the context of M&A and private equity structures. Delegates will…Frequently asked questions
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Day 1 LBO structuring Session 1 Introduction to Leveraged buy-outs Suitable candidates for LBO Establishing the amount of debt that can be used Assessing the type of debt that can be used Computing the blended cost of capital LBO characteristics Early transaction steps Significance of due diligence in the LBO process Case: International acquisition using bridge financing Session 2 Leveraged buy-outs Different types of transaction: LBO, MBO, MBI, BIMBO, SBO, LBU, P2P, etc. Acquisitions suitable for leveraged finance Deal structuring: equity and debt (including senior and mezzanine debt) Refinancing with bonds or other capital instruments post acquisition The leveraged buy-out process Lending practices pre-crunch Drivers for senior and mezzanine lenders Case: A large multinational LBO Session 3 LBO managers’ objectives Structure of the investors’ participation Limited partnership Remuneration Carried interest Money multiples, IRR Sources of value added Business restructuring Case: Computation of returns on an investment Session 4 The LBO process Drivers of performance Exit mechanisms Due diligence aspects Legal boilerplate Secondary buy-out due diligence issues Management warranties and indemnities High yield bonds as an alternative to mezzanine Case: High yield bond issue Day 2 Credit ratios in LBO deals Session 1 Documentation Term sheets Margin grid Purchase agreements Warranties and representations Covenants Internal LBO investor approval process Case: Term sheet analysis Session 2 Structuring objectives Priority: senior/junior Access to security Debt and its impact on equity returns Envy ratios, ratchets Senior equity Case: Envy ratio calculation Session 3 Exit routes Trade sale IPO Secondary buy-out Leveraged recapitalisation Case: leveraged recapitalisation Session 4 Key finance structure considerations Seniority of lenders Financial assistance problems Access to security Subordination: structural versus contractual Generation of tax shelter Debt pushdowns Inter-creditor agreement Using warrants to remunerate mezzanine providers Case: Review of inter-creditor structure Day 3 Modelling and other financing options Sessions 1 and 2 LBO cash flow model Cash flow projections Senior tranches Average loan life Setting loan repayments Using the cash sweep Building in covenants Calculating the warrant package Computing the LBO investor’s returns Check the credit ratios Check the security structure Case: Build model, compute the key credit metrics Session 3 Whole business securitisation Principles of securitisation Advantages: cost Structural issues Usage Case: Welcome Break, motorway service station operator Session 4 Other mezzanine financing instruments: hybrids, convertibles PIK notes +/- warrants Holdco PIKs Subordinated debt for financial institutions High yield debt Convertibles Hybrid securities Restrictions, covenant structures Case: High yield bond issue Course summary and close
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