Deal Financing Model - Evaluating a debt for equity recap, significantly increasing its overall financial leverage to learn Gross margin driving fixed charge coverage below 1.0X;
EBITDA Margin required to pay off senior debt with cash in five years;
Revenue CAGR to pay off senior debt with cash in five yearsLeverage Analysis
A regional Coca-Cola Bottler is evaluating a debt for equity recap, significantly increasing its overall financial leverage. The shareholders are working with their investment bank to determine how large an equity redemption is supportable by the Company, and what level of performance would cause distress.
Question 1: Assuming a flat growth rate (0.0%) what level of EBITDA margin (constant through the projection period) will cause the company's fixed charge measure to drop below 1.0Xs?
Question 2: Assuming a revenue growth rate of 1.5% annually, what EBITDA margin will be required for the company to have enough cash at the end of five years to fully fund it's senior debt?
Question 3: Assuming an EBITDA margin of 9.3% what level of revenue growth (CAGR) will be required for the company to have enough cash at the end of five years to fully fund it's senior debt?