LBO debt tranches and paydown

Methods and settings

Define the tranches

Add up to 30 named tranches. Each uses Amount or Leverage times entry Revenue, EBITDA or EBIT. Set cash rate, PIK rate, amortization percentage, maturity year, priority and sweep eligibility. Maturity must follow entry. When there is at most one tranche, the compact Entry leverage control can size that first tranche; with several tranches, review the detailed debt structure.

Opening balances drive interest

Cash interest is calculated on opening debt. PIK accrues on opening debt and is capitalized into the balance. In the native annual schedule,10% PIK on 100 adds 10 before repayment. A mix of cash and PIK rates therefore changes both current cash burden and future debt. Deal tax policy separately controls PIK deductibility.

Apply amortization, maturity and sweep in order

Annual amortization is based on the tranche’s original opening amount, capped by remaining debt including current PIK. At maturity, remaining opening debt plus current PIK is due. Mandatory payments precede sweep. Sweep budget is the configured percentage of cash above minimum cash, allocated to eligible tranches in ascending priority order and limited by their remaining balances.

Trace a single year

A tranche opens at 100 with 5% cash interest,2% PIK and 10% amortization. It has 5 cash interest,2 added PIK and 10 mandatory repayment, leaving 92 before sweep. If 20 of sweep reaches this tranche, it closes at 72. A tranche reaching maturity instead repays the full 102 before any sweep. An unfunded obligation is reflected in the cash shortfall, not in an invented loan draw.

Keep the LBO ledger distinct

This annual sponsor schedule is separate from Model debt and Credit Financing. It has no automatic revolving funding plug, market-priced loan margins, legal covenant package or intercreditor waterfall. Entry retained debt is separate from new tranches. Review funding shortfall before treating the projected IRR as usable.