easy · Private Equity & LBOs
If a company's EBITDA is $50 million and it has $40 million in cash-pay interest, it has $10 million in 'cushion'.
If that $40 million were instead PIK interest, how would 'Cash Flow Available for Debt Service' (CFADS) change?
- CFADS would increase by approximately $30 million.
- CFADS would decrease by $40 million.
- CFADS would increase by exactly $40 million.
- CFADS would remain unchanged because PIK is an accounting entry.
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