We're going to have a look at three workouts starting with workout one, and then workouts two and three follow on from that. In this scenario, we are advising Snowshoe Inc. a retailer that is facing financial distress. The company is trying to negotiate a restructuring deal with its creditors. We've been provided with some financial information on the company, and what we need to do in the first workout is calculate Snowshoe Inc's net leverage for each rank of the capital structure, and they've got senior and unsecured debt based on the company's view of normalized EBITDA. To calculate net leverage, we're going to need net debt at the different levels of seniority, and then we're going to divide that by normalized EBITDA.

Looking at the information we've been given, we've got cash and cash equivalents, the amount of senior secured debt outstanding, and the amount of unsecured debt outstanding. So these three elements are going to be used to calculate net debt, which is debt minus cash and cash equivalence. We've then got normalized EBITDA, which is going to be the denominator in our net leverage calculation. Underneath that, we have the senior and the unsecured creditor's view of valuation, the EV to EBITDA multiple for the business. We are not gonna be using that in this workout. So to calculate normalized senior net leverage, we need to start off by calculating net debt at the senior level. So we are going to pick up the debt figure of 80 for senior secure debt. Subtract off the 10 cash and cash equivalents that gives us net debt of 70, and divide that by the normalized EBITDA of 25. To get a net leverage, multiple of 2.8 times looking at leverage at the unsecured level, we've got to include all of the net debt up to and including the unsecured debt. So that means not only do we have to add 80 senior secured debt, we also have to add the one 20 unsecured debt, subtract the 10 cash and cash equivalents and divide that by 25. Normalized EBITDA to give as expected, a much higher leverage, multiple of 7.6 times.