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 Recapitalization Modeling

Course Goals & Overview:

This course walks through the concepts behind company recapitalizations (recaps) and quantifies the impact of the various approaches available. The first section opens with a high-level discussion of recaps and debt/equity swaps. Next is a brief primer on key credit ratios and how they can be implemented with best practices in Excel. The meat of the course then begins, reviewing multiple recapitalization strategies one by one, thoroughly explained qualitatively and executed quantitatively in a working Excel model. Afterward, these results are analyzed before wrapping up with a complicated scenario and sensitivity layer that can determine viable scenarios based on different assumptions of credit/leverage statistics. What’s left is a comprehensive model capable of simulating strategies for any recap situation.

Course Sections:

Intro to Recapitalizations

  • Understand the definition of a recapitalization, including the parties and subjects involved
  • Identify a recapitalization’s general motivations and consequences
  • List several real-world use cases of recaps with an emphasis on standard debt-for-equity swaps
Plain Debt Sweep & Credit Ratios:
 
  • Review basic mechanics of financial statements to understand a debt sweep’s structure
  • Create a simple debt/interest schedule in Excel using real historical financial statements
  • Discuss and calculate various key credit ratios including leverage, net leverage, FCCR, and interest coverage
  • Quantify the impact that changes to revenues/expenses have on EBITDA and cash flow

Recapitalization Model - Status Quo and Swap:

  • Start with a “status quo” recap option spanning across three cases (base, downside, worst)
  • Add an initial recap option for taking on a debt/equity swap, ensuring the model also accounts for interest rates, etc.

Recapitalization Model Enhancement - Swap with Paid-in-Kind (PIK) Debt:

  • Implement a fourth recap option incorporating the conversion of the debt/equity swap’s balance to PIK debt
  • Fully integrate all the PIK components into the model, noting the PIK’s impact on cash flow
  • Add “cash interest” alternatives for potentially misleading ratios such as EBITDA/Interest and EBIT/interest

Recapitalization Model Enhancement – Scenario Pairing:

  • Lay out different scenarios depending on assumed credit/leverage statistics
  • Modify the model to easily switch between viable scenarios
  • Create ratings statistics tables for the scenarios to quickly gauge the available options

Recapitalization Model Enhancement – The Works:

  • Implement a fifth recap option incorporating the debt/equity swap, a term loan, and PIK debt
  • Add a “Cash DSCR” ratio and utilize Excel’s conditional formatting to draw attention to unfavorable scenarios
  • Carefully re-examine DSCR under the fourth and fifth recap options to clarify an otherwise simple analysis

Conclusion:

  • Select the best courses of action (per case) to recapitalize, and develop a solid understanding of managing cash flow

 Registration Fees

CFAW Members: $899.00
Non-Members: $999.00

Currency: U.S. Dollar ($)

 Dates and Location

June 4  - 5, 2019

9 am - 5 pm

George Mason University - Arlington Campus
Founders Hall 310
3351 North Fairfax Drive
Arlington, VA 22201

Registration coming soon.


 Discounts & Refunds

Group Discount: Organizations are eligible for a 10% discount when registering three or more people for an event. All registrations must be received at the same time. Email all discount registrations together to events@cfawashington.org

 
Cancellations, Substitution, and Refund Requests
 
  • Substitutions are welcome at any time.
  • Cancelations must be made in writing and emailed to events@cfawashington.org   on or before 5 business days prior to the event.
  • No refunds will be processed after 5 pm ET, 5 business days prior to the event. 
  • A $25 administrative fee will be applied to all cancellations.​
  • Refunds will not be issued for no shows