United Kingdom

SUPPLEMENT - THE 2005 GUIDE TO PRIVATE EQUITY AND VENTURE CAPITAL - January 13, 2005

Maximizing debt quantum has always been a consideration for sponsors in the private equity market when weighing up financing proposals. Unprecedented levels of liquidity across the bank markets, sponsors' desire to invest their capital sooner rather than later, and vendors driving highly competitive auction processes have all contributed to rising LBO asset prices. In these market conditions, debt quantum has become of paramount importance.

Constraints on debt quantum arise from modelling the target's cashflows, reflecting the ongoing risks associated with the performance of the business. The value of the real estate on the target's balance sheet is not taken into account in assessing the ability of the business to service debt going forward.

Value locked up in a property portfolio can be released (post-whitewash) to assist in financing a bid by property financiers willing to lend to a bankruptcy-remote, property-owning SPV on a loan-to-value basis backed by a flow of lease rentals from the...



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