• 04/01/2019
    Senior Debt Summary of Terms (or Term Sheet)
    This post references an example Senior Debt Summary of Terms, which is available for download. The company described in the document is entirely fictional.
     
    When a private equity group or independent sponsor is working towards an acquisition, they will ask providers of capital to submit a Summary of Terms or Term Sheet to gauge preliminary interest in financing the transaction. Once a collection of such documents have been collected, the private equity group will determine which lenders it wants to move forward with. 
     
    As it relates to building financial models, the most important variables to be aware of are as follows:
     
    1. The amount of the loan.
    2. The interest rate.
    3. The amortization schedule (defines how the loan is paid back).
    4. Whether or not there is a cash flow sweep.
    5. Financial covenants.

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    Items 1 through 4 above are required to build a debt schedule (see how this is done in the Leveraged Buyout Model video series). The financial covenants are critical because they allow you to run scenarios and determine if you are in compliance with your lenders.

    Related Links: Monthly Debt Schedules Example