medium · Private Credit market-sourcing-sponsor-dynamics
A sponsor-backed company pays its PE parent a 'Management Monitoring Fee' of $500,000 annually.
Why do lenders often see this as a valid EBITDA add-back?
- It improves the company's official third-party credit rating
- The fee is often restricted or subordinated to debt payments in distress
- It is treated as a purely non-cash accounting bookkeeping entry
- The fee represents a core, essential operational cost of the business
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