Modeling Credit Scenarios Part 3 Workout
- 01:51
Modeling Credit Scenarios Part 3 Workout
Transcript
Now that we have the scenarios built and they're flowing through the model properly, we wanna make sure that they're working the way that we want them to work. So I have a ratio page here that's already built, and one thing that I wanna do just to be helpful again is to link my header to either the header from the previous tab or to the actual selector cell here, so that we always know which case we're in. So if I go back to my Company case and I choose the Company case, what I'm seeing here are the numbers as the company presented to us. I'm seeing the company growth numbers and the company EBITDA margin as they presented them, and if I look down at the ratios, I can sort of see where we are. We can see that this is not a heavily levered company. However, we would still need to pay attention to these ratios because if this is to become a debt capacity study, the leverage is going to go up. So in this case, if we look at EBITDA, it's 296.4 in the Company case. If we switch it to the Bank case, what happens to it? It goes down to 270.4. That's about a 10%, roughly a 10% haircut. If I switch to the downside case, it goes from 296 down to 208, and that's a more dramatic haircut. That's between 20 and 30%, and that's about what we want it to be. We'll also notice that the leverage ratios start to creep up a little bit, 'cause as we're lowering our EBITDA, the debt EBITDA ratio is gonna go up. Now, where this is gonna come in handy for us is as we start to actually layer in debt in a debt capacity study, we'll be able to sensitize EBITDA and sensitize the growth, and it'll give us an idea as to whether this company can truly handle the leverage.