Negotiating EBITDA and Financial Covenants in Middle ...

Presenting a 90-Minute Encore Presentation of the Teleconference with Live, Interactive Q&A

Negotiating EBITDA and Financial Covenants in Middle Market Loan Agreements

THURSDAY, DECEMBER 12, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

Today's faculty features: Jay Spader, Of Counsel, Brownstein Hyatt Farber Schreck, Denver Mark M. Oveson, Shareholder, Brownstein Hyatt Farber Schreck, Denver

The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.

FOR LIVE EVENT ONLY

Sound Quality If you are listening via your computer speakers, please note that the quality of your sound will vary depending on the speed and quality of your internet connection.

If the sound quality is not satisfactory, you may listen via the phone: dial 1-888-450-9970 and enter your PIN when prompted. Otherwise, please send us a chat or e-mail sound@ immediately so we can address the problem.

If you dialed in and have any difficulties during the call, press *0 for assistance.

Viewing Quality To maximize your screen, press the F11 key on your keyboard. To exit full screen, press the F11 key again.

FOR LIVE EVENT ONLY

For CLE purposes, please let us know how many people are listening at your location by completing each of the following steps: ? Close the notification box ? In the chat box, type (1) your company name and (2) the number of

attendees at your location ? Click the SEND button beside the box

FOR LIVE EVENT ONLY

If you have not printed the conference materials for this program, please complete the following steps: ? Click on the ^ symbol next to "Conference Materials" in the middle of the left-

hand column on your screen. ? Click on the tab labeled "Handouts" that appears, and there you will see a

PDF of the slides for today's program. ? Double click on the PDF and a separate page will open. ? Print the slides by clicking on the printer icon.

Negotiating EBITDA and Financial Covenants in Middle Market Loan Agreements

Presented by: Mark Oveson (BHFS) moveson@ Jay Spader (BHFS) jspader@

5 December 4, 2013

What is Middle Market?

? Borrower Size: ? Less than $500 million in annual revenue or $15 million to $100 million in EBITDA

? Loan Amount: ? Traditional Middle Market: up to $100 million ? Large middle market: up to $500 million

? Defining Market characteristics: ? Club Deals (relationship lending) ? Buy and hold mentality

6

Why EBITDA? Cash Flow Lending

? Lender is focused primarily on Cash Flow in making credit decision (secondary focus on assets) ? Most Common Cash Flow Ratios:

? Fixed Charge Coverage Ratio ? Leverage Ratio

? EBITDA is a modified Cash Flow calculation that gauges recurring operational strength.

? EBITDA is more "comparable" when evaluating different companies than cash flow from operations, which is impacted by several factors that differ across companies (interest, tax, working capital).

? EBITDA is viewed as best proxy for cash-generating power on a comparable basis. ? EBITDA measurement is backward looking and generally covers past twelve months. This "flattens"

the numbers so that companies with seasonal businesses can stay in compliance.

7

EBITDA

Simplified Income Statement ? Steps

Revenue (COGS) (SG&A) [EBITDA] (Depreciation)

(Interest Expense) (Taxes) Net Income

Distributions / Capitalized Outlays (such as CapEx)

Description

Proceeds from Sales

Costs of Goods Sold (an expense)

Sales, General and Administrative (an expense)

Not a GAAP concept, but would fit in here

A non-cash expense for current calculation period resulting from capitalizing past expenditures rather than expensing

Amounts to be paid in connection with debt financing (an expense)

(an expense)

The "Bottom Line" and where we start with an EBITDA definition. "Net Income" will itself be a defined term, starting from the GAAP concept of net income and making adjustments from there.

Uses of cash that are not expenses for purposes of determining net income and thus not add-backs.

8

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download