medium · Private Equity & LBOs
A sponsor models a $500M loan with 3.0% in total financing costs (Fees + OID). The loan is amortized at 1% per annum. At the end of Year 1, the company makes a voluntary prepayment of $50M.
Under standard GAAP, what happens to the capitalized fees?
- There is no change to the amortization schedule.
- The entire remaining fee balance is written off.
- The fees are re-capitalized and added back to the debt balance.
- A proportional amount of unamortized fees (10%) must be written off immediately.
Sign up free to see the explanation and track your rank →
More Private Equity & LBOs practice
- If the GP receives a 20% carry on the profit from Deal A immediately, and the fund eventua
- Following the investment, what is the investor's ownership percentage in the company, assu
- What is the Interest Coverage Ratio?
- A private equity firm is calculating a 'Public Market Equiva… — If the KS-PME score is 1.1
- A sponsor provides an 'Equity Cure' to a portfolio company. What is the standard purpose o
- What is the new effective conversion price for the growth equity investor?
- Which company will report a higher 'Gross Margin' and a higher ending 'Inventory' value on
- What is the company's Interest Coverage Ratio?