It's now time to turn our attention to the heart of the LBO model, which is the debt page.

First thing we'll do is we will look at the structure of this page and then calculate the cash flow available for debt.

The model begins with the mandatory repayment assumptions and what we see here are three different types of debt that could possibly ask for mandatory repayments, first lien, second lien in unitranche.

Typically, depending on what the first lien debt is, if it's term loan A, it will absolutely amortize.

If it's term loan B, it will generally amortize a very small amount, usually around 1% per year.

If it's unitranche, most likely it will never amortize. That's one of the benefits of unitranche. However, it is possible and markets change as do trends in those markets that any of them could.

So we have amortization assumptions built in.

We have them zeroed out in this model.

So we'll deal more with the mandatory repayment assumptions when we get into the various tranches of debt.

But the next thing to do to get into those pay downs is to look at the cash flow available for debt.

Once we have that, it'll tell us, do we have any cash or do we need cash? It'll also tell us, in the case of having mandatory repayments, if we have enough cash to cover those repayments.

And if not, it will tell us how much we need to cover that shortfall.

So that's what's happening here and this is where the revolver will be calculated.

And then once we have that cash situation defined, we can then apply any excess cash, if there is any, into accelerated repayment for the remaining pieces of debt if they are in fact able to be accelerated.

So the first thing we'll do here is we'll calculate our cash flow available for debt.

And we do here as we start with our beginning cash balance.

And this is going to be a place where we actually kind of violate our matrix integrity because this, this model doesn't flow in the way that a base analysis model flows.

It's really calculated each year.

So our beginning cash balance, we need to make sure absolute certain that this comes from the previous, if it does not come from the previous year, if we accidentally take the current year, it will be a circular reference.

Because this is the number that we're actually trying to define cash that we began the year with was zero.

And then the cashflow from operations, we've already calculated the cashflow from investing.

We've already calculated the next items are actually related to the financing cash flows.

So the majority of the financing cash flows are the debt items, and we're going to be calculating those debt items below.

But the bridge loan and the lease liability are, are very specific and they're not traditional debt products. The bridge loan is going to be taken out as soon as possible when we do the sale lease back.

And then the lease liability, as well, is somewhat unique in terms of how it's modeled. So if cash is needed for those repayments, that's not coming out of our mandatory repayments above, we need to make sure that that cash gets taken out of the cash available for debt because those are kind of priority refinancings so to speak.

So they're not effectively being repaid because that would might aggravate some of the, the more senior bank holders like a first lien, but they are being refinanced and that's accepted.

So I will link these to the cashflow statement, but we will come back and deal with them later.

Bridge loan and lease liability and then the dividends, which are also related to the sale lease back will be here as well as a cash outflow most likely.

And that's going to affect our cash available for debt repayment as well.

Dividends of course, are a very sensitive thing sometimes they're not even allowed.

It has to be structured in a certain way.

Again, it's very difficult to get cash out of these kinds of companies, these kinds of operating companies without the approval of the senior lenders or the creditors in general.

So let's take a look now, what we have to do, the mandatory repayments, we're actually not going to calculate here.

We're going to calculate them down below.

And this is very typical if you've built a cash sweep model with Financial Edge, is the way we do it, we'll model them in the tranches of debt.

And the reason why is because it's quite possible that the acceleration of the repayment of debt will actually preclude the need to make a mandatory repayment.

In other words, if we've already accelerated and we've paid down a significant portion of the debt, we might not need to make a schedule of mandated repayments.

So a lot of this is, is not applicable to this model, but we we're going to build that structure in.

So the cashflow available for debt repayment, we've calculated the mandatory repayments, we will skip, but we will build those in.

So those will, those will technically reduce any cash that we have available to, to accelerate debt.

So that's going to be the sum of my cashflow for debt repayment and these items which will be negative if they are, if they in fact exist.

And that gives us the cash available for our first tier of debt, which is the revolver.