medium · Private Equity & LBOs

If a Term Loan B (TLB) is issued with an 'Original Issue Discount' (OID) of 2%, how does this affect the Sources and Uses table at closing?

1. The OID is a 'Source' because it reduces the amount of interest the company has to pay.
2. The OID increases the 'Equity Purchase Price' paid to the seller.
3. The OID is a 'Use' of cash because the company receives only 98% of the loan's face value but owes 100%.
4. The OID is ignored s and Uses table and only appears on the Income Statement.

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