How can I add a Dividend Recap to my LBO?

Dividend Recaps can be added to new or existing Mosaic LBOs through the Special Situations panel. 

Including Dividend Recaps in a New LBO

In a new LBO, as you complete the various stages in the assumptions "Wizard," navigate to the Special Situations Step and check the box for Dividend Recap:

Advance to the next step, and complete the required fields and update any default fields as required for your deal.

Adding Dividend Recaps to an Existing LBO

When viewing an existing LBO, navigate to the lefthand sidebar, then down to the "Special Situations" sections, then to "Dividend Recap" as shown below:

Complete the required fields and update any default fields as required. Mosaic will recalculate automatically and produce updated LBO outputs as shown above.

Viewing Dividend Recap Details (Dashboard)

To view detailed calculations supporting the Dividend Recap navigate to the Exit & Returns Section of the Summary tab, the FCF tab, and the Credit tab of the LBO as shown below:

Viewing Dividend Recap Details (Excel)

Detailed calculations supporting the Dividend Recap can be reviewed in full transparency by downloading the model to Excel. Click the download button on the top navigation bar as shown below:

When the Excel file opens, navigate to the Returns, FCF, and Debt tabs to review the relevant calculations therein.  

For further information supporting the methodology employed by Mosaic's Dividend Recap functionality, please visit our technical guide hosted at Mosaic Academy linked below:

Dividend Recap Modeling Guide

Below is some background on each assumption available in Mosaic related to Dividend Recaps:

• Recap Year. This refers to the year during the investment hold period in which the Recap will take place. Investors typically select year 3 or 4 of the investment hold period (i.e., somewhere in the middle).
• Max. Leverage. This is the maximum leverage (debt) multiple of EBITDA (or whatever relevant metric for financing your deal) that the company would be able to raise at the time of Recap. It will drive the dollar amount raised in the recap depending on the quantum of trailing EBITDA / other financing metric at the Recap Year.
• Maturity (Yrs). This refers to the length of time until the newly raised debt must be repaid. Its only practical relevance in modeling is for amortizing the financing fees through the tax schedule.
• Rate / Spread. This refers to the interest rate applied to the debt raised in the Recap. Can be fixed (stated as a percentage) or floating (stated as a basis point spread to some reference rate like SOFR).
• Floor. In the context of a floating-rate loan, a floor is the minimum interest rate that must be paid, regardless of how low the reference rate (e.g., SOFR) might fall.
• Underwriter Fee. This is a fee paid to the financial institution(s) that arrange and underwrite the debt financing. The fee compensates the underwriters for their services in structuring the deal, marketing the debt to investors, and assuming some level of risk.
• OID (Original Issue Discount). This is a form of interest that is incorporated into the pricing of the debt at issuance. Debt issued at an OID is sold at a discount to its par (or face) value, and the difference between the issue price and the par value is effectively additional interest income for the lender and financing fees for the borrower over the life of the debt.