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60-Minute Live Mini-LBOTimed attempt

Walkthrough · Lesson 5 of 5

Review credit after the timer

Explain whether deleveraging and interest coverage support the proposed return.

Working files

Save the independent attempt and open the identified source files.

Use the later worked grid for this optional review. The published reference return is conditional on its selected opening leverage and exit.

Build the live model

  1. Time the exercise from receipt

    Time the exercise from receipt. Share the screen for the live version. Return Port Alder - Candidate.xlsx at the one-hour cutoff, including an incomplete attempt. Include the three short responses.

    Current edition

    Solution and debrief, page 2
    Solution and debrief, page 2Open full size · Solution and debrief, page 2

  2. Work through step 2

    In Port Alder - Solved.xlsx on Model Exercise!D18:E27, separate $112.74m seller consideration from the $12m debt refinance. Uses of $126.74m less $63m new debt require $63.74m sponsor cash. Use working-capital days and charge interest on beginning senior and subordinated balances.

  3. Apply senior priority

    Model Exercise rows 48:65 pay the senior first. Year one free cash of $6.846m reduces senior debt. In year five, after retiring the remaining $11.826m senior balance, only $0.635m is left to pay the subordinated loan. Ending subordinated principal is $15.365m.

  4. Defend the realized return

    Model Exercise!P74:P77 and K79:K80 returns $168.134m, 2.638x and 21.41%. Answer how the buyer can improve returns, how earnings become cash, and whether the return clears a stated hurdle.

  5. Check the credit path

    After the timer, open Model Exercise!L67:P68. Net debt / EBITDA falls from 3.43x to 0.69x and EBIT / cash interest rises from 3.05x to 8.10x. The center cells N88 and N97 reproduce 21.41% and 2.638x. Dropping exit from 8.25x to 7.25x at the same entry price gives 18.01%. Year three yields 23.16% but only 1.87x. A shorter hold raises annualized return without necessarily increasing total profit.

  6. Recognize an unfunded exit

    Model Exercise!L48:P52 carries cash left after debt service. Preserve historical receivable days at K38; changing the first forecast year to 43 days cuts senior repayment at L57 to $5.147m. A 12% sales decline in each forecast year uses $7.573m in FY2030 and leaves $14.066m cumulatively unfunded. Negative cash is a financing gap. Under the supplied debt structure the return is N/M until an equity injection or other funding is specified. A funded exit with no value left for common equity instead earns 0.00x and a total loss.

    Source Model Exercise!L48:P52, K79:K81

Check the model and defense

  • Reference result · Port Alder - Solved.xlsx · Model Exercise!N88 Base IRR in the optional sensitivity
    21.4%
  • Mechanical check · Review credit after the timer Reconciliation
  • Judgment check · Review credit after the timer Investment judgment

    What would improve sponsor returns without assuming a higher exit multiple?

Figures are rounded for display. Check your formulas at full precision. Displayed totals may differ slightly.
If your result differs
The reference result is quoted without tracing the relevant schedule.

Sweep debt in the required priority and stop each repayment at zero.

A negative IRR or negative equity multiple appears under distress.

Check whether funding is available through the selected sale year. Without a valid financing plan show N/M; a fully financed but wiped-out sponsor earns 0.00x and loses its entire investment.

Other files for this lesson