hard · Private Equity accounting-flow
A sponsor models a 15% PIK junior note to maximize leverage.
How does this affect the 'Equity Plug' s and Uses table at entry?
- It reduces the required sponsor equity check by providing more debt proceeds at close.
- It increases the sponsor equity check because PIK is viewed as 'equity-like' by senior lenders.
- It increases the required equity due to higher financing fees.
- It has no effect because PIK interest is non-cash at entry.
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