Restructuration de la dette et covenants
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Questions and Answers

Qu'est-ce qui peut déclencher un défaut de paiement selon le texte?

  • L'impossibilité de payer les intérêts
  • La violation des clauses de la dette (correct)
  • La conversion de la dette senior en dette junior
  • Une augmentation du capital

    • Quel est l'objectif des covenants dans le secteur du private equity selon le texte?

  • Assurer un retour sur investissement élevé pour l'emprunteur
  • Protéger l'emprunteur des risques financiers
  • Empêcher l'emprunteur de prendre des risques menant à l'incapacité de remplir ses obligations (correct)
  • Faciliter l'accès à de nouveaux financements

    • Qu'est-ce qui peut transformer la détresse financière en détresse économique selon le texte?

  • La résolution rapide des problèmes financiers
  • La réticence des clients à acheter à nouveau (correct)
  • L'augmentation des actifs de l'entreprise
  • La réduction des coûts indirects

    • Quels sont les coûts associés à la détresse financière selon le texte?

    <p>Frais d'avocat d'environ 2-3% des actifs des grosses compagnies</p> Signup and view all the answers

    Quel est l'un des avantages de l'arrangement privé par rapport à la faillite?

    <p>Moins de frais juridiques et professionnels</p> Signup and view all the answers

    Quelle est la conséquence probable d'une détérioration rapide de la situation économique d'une entreprise?

    <p>Passer directement à la faillite plutôt qu'à un arrangement privé</p> Signup and view all the answers

    Quel est l'effet d'un comportement souple des prêteurs lors d'une restructuration?

    <p>Réduction du paiement des intérêts ou du montant du principal</p> Signup and view all the answers

    Qu'est-ce qu'un 'debt for equity swap'?

    <p>Ancienne dette se transforme en nouvel capital</p> Signup and view all the answers

    Qu'est-ce que 'time inconsistency'?

    <p>'Si les dirigeants anticipent que les prêteurs ne renégocieront pas en cas de défaillance'</p> Signup and view all the answers

    What is a corporate charter?

    <p>A document filed to establish a company as a corporation</p> Signup and view all the answers

    What are bylaws?

    <p>Mandates stating how the company will operate and the rights or powers of its stakeholders</p> Signup and view all the answers

    What is winding up (liquidation)?

    <p>Converting the remaining fixed assets and inventory into cash; distributing assets and ceasing to exist legally</p> Signup and view all the answers

    What is the closing date?

    <p>The date at which the contract starts</p> Signup and view all the answers

    What is the main purpose of covenants in private equity?

    <p>To provide financial protection to lenders in case of borrower breaches</p> Signup and view all the answers

    In what situation is debt restructuring considered appropriate?

    <p>Financial distress</p> Signup and view all the answers

    What is the main difference between private workout and bankruptcy filing?

    <p>Direct costs and duration</p> Signup and view all the answers

    What does public workout involve?

    <p>Involvement of a third party, such as a court</p> Signup and view all the answers

    What factors influence asset value during debt restructuring?

    <p>Economic conditions and legal orientation of the country's bankruptcy procedure</p> Signup and view all the answers

    Why is implementing private restructuring challenging when multiple lenders are involved?

    <p>Agreement coordination among multiple lenders</p> Signup and view all the answers

    What does option pricing theory define call options as?

    <p>The right, but not the obligation, to buy an asset at a specified exercise price</p> Signup and view all the answers

    What influences the option value according to the text?

    <p>Stock price, exercise price, volatility, time of expiration, and risk-free rate</p> Signup and view all the answers

    What is the Black-Scholes Option Pricing Model used for?

    <p>Valuation</p> Signup and view all the answers

    What does valuation involve according to the text?

    <p>Computing the final value of a firm, discounting it, and determining the required final percent ownership while considering future dilution</p> Signup and view all the answers

    What are the characteristics of debt restructuring mentioned in the text?

    <p>Interest rate, maturity, covenant waiver, and increasing collateral</p> Signup and view all the answers

    Why is valuing start-up companies more challenging according to the text?

    <p>Due to limited information available about them</p> Signup and view all the answers

    What are common ratios used for valuing public companies mentioned in the text?

    <p>PER (Price-to-Earnings Ratio), market value/total revenue ratio, market to book ratio</p> Signup and view all the answers

    What are some problems with the comparable method for valuation mentioned in the text?

    <p>Overvalued companies used for comparison, unavailable information about similar firms, differences between public and private companies</p> Signup and view all the answers

    What does the DCF model calculate according to the text?

    <p>Cash flows and terminal value of a company; determines discount rate; computes expected return on equity; considers financial structure of the company.</p> Signup and view all the answers

    What is the typical hurdle return for LP in LBO operations?

    <p>8%</p> Signup and view all the answers

    What is the typical percentage of debt used to highly leverage holding companies in LBOs?

    <p>70%</p> Signup and view all the answers

    How long does the holding company usually have to pay back the debt it issued to acquire the target in an LBO?

    <p>5 to 7 years</p> Signup and view all the answers

    What percentage of the target do shareholders own at date 0 in an LBO?

    <p>30%</p> Signup and view all the answers

    How can a fund exit from an LBO investment?

    <p>All of the above</p> Signup and view all the answers

    What is the measure of success often used in evaluating an LBO investment?

    <p>IRR (Internal Rate of Return)</p> Signup and view all the answers

    What happens when more debt is used in an LBO?

    <p>It increases the ROE but increases risk for shareholders</p> Signup and view all the answers

    What is the formula for calculating IRR?

    <p>$IRR = (equity proceeds at exit / initial equity invested) ^ {(1/years)} - 1$</p> Signup and view all the answers

    Who is responsible for the day-to-day management of capital raised for LBOs in private equity?

    <p>General Partners (GPs)</p> Signup and view all the answers

    What type of investors provide funds but do not choose firms for investment in private equity?

    <p>Limited Partners (LPs)</p> Signup and view all the answers

    What percentage of the partnership do General Partners (GPs) own in private equity?

    <p>$1\text{%}$</p> Signup and view all the answers

    Which type of investors are the major Venture Capital (VC) investors in the US?

    <p>Pension funds</p> Signup and view all the answers

    What is the typical management fee percentage taken by General Partners (GPs) in private equity?

    <p>$1.5\text{-}3\text{%}$ of committed capital</p> Signup and view all the answers

    What boosted the development of Venture Capital (VC) in the US in the 1970s?

    <p>The arrival of pension funds</p> Signup and view all the answers

    What is the typical percentage of profits as carried interest received by General Partners (GPs) in LBOs in private equity?

    <p>$20\text{%}$</p> Signup and view all the answers

    Which type of investors are the biggest investors of VC in Europe?

    <p>Government agencies</p> Signup and view all the answers

    What is the main exit strategy for Venture Capital (VC)?

    <p>Return profits to LPs and GPs via acquisition or IPO</p> Signup and view all the answers

    What is the percentage of transactions dedicated to LBOs according to the text?

    <p>5%</p> Signup and view all the answers

    When was the first VC fund founded according to the text?

    <p>1946</p> Signup and view all the answers

    What does VC investment return profits to according to the text?

    <p>LPs and GPs</p> Signup and view all the answers

    Study Notes

    Valuation and Option Pricing in Financing

    • Flexibility in financing involves adjusting production rates, deferring development, or abandoning a project.
    • Option pricing theory defines call options as the right, but not the obligation, to buy an asset at a specified exercise price.
    • The value of a call option at maturity is determined by the exercise price and the stock price.
    • Option value depends on intrinsic value and time premium, influenced by stock price, exercise price, volatility, time of expiration, and risk-free rate.
    • The Black-Scholes Option Pricing Model is used for valuation but has weaknesses, including difficulty in estimating volatility and inappropriate pricing for nested call series.
    • Valuation involves computing the final value of a firm, discounting it, and determining the required final percent ownership while considering future dilution.
    • Comparable method for valuation involves identifying similar firms, searching for potential measures of value, and applying those measures to the company being evaluated.
    • Discounted cash flows valuation includes computing cash flows, calculating the terminal value, determining the discount rate, and computing the expected rate of return on equity.
    • Debt restructuring involves changing characteristics of the debt contract, such as interest rate, maturity, covenant waiver, and increasing collateral.
    • Valuing start-up companies is more challenging due to limited information, while public companies can be valued using common ratios like PER, market value/total revenue, and market to book ratio.
    • Problems with the comparable method include overvalued companies used for comparison, unavailable information, and differences between public and private companies.
    • The DCF model calculates cash flows and terminal value, determines the discount rate, computes expected return on equity, and considers the financial structure of the company.

    Private Equity and Venture Capital Overview

    • PE mainly raises capital for LBOs, managed by General Partners (GPs) who are responsible for day-to-day management.
    • Partnerships typically last 12-15 years, with GPs not protected by limited liabilities, bearing the risk of losses.
    • Limited Partners (LPs) provide funds, including mutual funds, pension funds, endowments, individuals, or families, but do not choose firms for investment.
    • GPs own 1% of the partnership, while LPs own 99% and invest in diversified portfolio companies.
    • GPs take management fees, typically 1.5-3% of committed capital, and receive 20% of profits as carried interest in LBOs, despite investing only 1%.
    • VC was founded in the US, and the arrival of pension funds in the 1970s significantly boosted VC development.
    • Largest IPO VC-backed is Airbnb, and the first VC fund was founded in 1946, with a significant return from an investment in Digital Equipment Company.
    • The biggest investors of VC in Europe are government agencies, corporate investors, pensions funds, insurances companies, and private individuals.
    • In the US, pension funds are the major VC investors, with investments increasing from $64 million in 1978 to $4 billion in 1986 due to diversification.
    • VC works through fundraising, investment in high-growth companies, company growth support, and exit via acquisition or IPO, returning profits to LPs and GPs.
    • There are different types of VCs, including independent VCs, corporate VCs, and banks VCs, with a close date being the fund's creation date.
    • LBO involves acquiring listed companies using a mix of private equity funds and leverage, with 5% of transactions dedicated to LBOs, and notable successes and failures in the past.

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    Description

    Ce quiz aborde la restructuration de la dette, les caractéristiques des contrats de dette, les déclencheurs de défaut et les covenants en pratique et dans le private equity. C'est un contenu utile pour ceux qui s'intéressent à la finance et à la gestion de la dette.

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