CoursHeroTranscribedText: FIM 3254 = Case Study #4 York Capital CLOs and WorldStrides International Due 5/2/24 Please find the data file, "York Capital CLO Case Data.xlsx". This is a two-person group project. Please submit your file with written answers to the questions below. Include tables for any calculations and include the calculation inputs. Questions: 1) Describe the historical losses or impairments for different CLO tranches. Given the historical losses, do you think it is appropriate for the rating agencies to give the upper tranches investment grade ratings? Explain your answer. 2] 'What is a Weighted Average Rating Factor, and how do they factor into the covenant tests? How does Moody's calculate WARF? 3) What are collateral guality tests? Explain the impact of the COVID-19 pandemic on York Capital's collateral guality and WARF, 4] 'What are the components of the coverage tests? What are the Over Collateralization (0C) tests for York Capital? 5] In Aprl of 2020, describe the debt by instrument and how this compared to the initial amount of debt when Eurazeo purchased WorldStrides. How was the company able to issue new debt given the existing incurrence covenants? 6] Calculate the Eurazeo EBITDA acquisition multiple based on the purchase value. Use 2018 Adjusted EBITDA to calculate. 7] Given the two existing restructuring proposals, which one do you think York Capital would prefer? What are the implied EBITDA multiples from the valuations in the restructuring proposzals? Do you think WorldStrides should be valued at a higher multiple, and why? Extra Credit: 8) Create a restructuring proposal that CLO managers might vote for in favor of the other two. Your proposal should include the new debt structure and the company"s implied valuation as an QNEoINg COncern. B C D E F G H 2 Acquisition 3 Term Loan B $ 425m (senior secured, 1st lien debt) 425 Metalmark PIK Seller Notes 100 (subordinated HoldCo notes) 00 5 Equity 584 584 6 Total $1, 109m 1109 8 4/1/20 9 Revolver Term Loan A 60 10 Term Loan B 584 Metalmark PIK Seller Notes 126 12 Total Debt 770 13 14 15 Proposal 1 16 Equity Injection 60 17 New 1st Lien 110 18 New 2nd Lien (old 1st Lien) 321 19 Metalmark PIK Seller Notes 0 20 Total Value 491 21 Total Debt 431 22 23 Proposal 2 24 Equity to Second Lien 0 25 New 1st Lien 230 26 New 2nd Lien (old 1st Lien) 201 27 Metalmark PIK Seller Notes 28 Total Value 131 29 Total Debt 431 30 31 32 Capital Structures EBITDA Bridge Pro Forma For Acquisition +A B C D E F G H 1 (in Millions) FYE 2019 2 Reported EBITDA 42.4 3 (1) Pro Forma Acquisitions (Envision and TEAN) 27.1 Pro Forma Reported EBITDA 69.4 5 (2) Normalize Non-Annual 6 Currency Gains/Losses 3.8 (3) China Startup/Close Down Costs 1.4 8 (4) Other Non-Recurring 8.3 9 (5) Business Interruption Insurance 1 Adjusted EBITDA 84.9 1 1 (6) Normalized Change in Deferred Revenue 8.9 12 (7) Cash Adjustment 2.4 13 Cash Adjusted EBITDA 87.4 14 Acquired EBITDA 6.3 15 Run Rate Cost Synergies 0 16 Pro Forma Adjusted EBITDA 94.5 17 18 19 20 21 22 23 25 26 28 D Capital Structures EBITDA Bridge Pro Forma For Acquisition +A B C D E F G H K 1 FYE June ($ in millions) FYE 2018 FYE 2019 2 K12 $ 358.10 $ 374.40 3 Higher Ed - Individuals $ 62.10 $ 59.50 Higher Ed - Groups $ 47.40 $ 50.90 5 On Stage 53.90 $ 48.90 6 Asia Pacific $ 30.10 23.50 Other (1) EA 134.40 139.50 8 Revenue 686.10 696.80 9 Gross Profit 254.70 260.20 10 SG&A $ 178.70 $ 179.20 11 Adjusted EBITDA EA 77.80 84.90 12 Cash Adjustment 1.80 $ 2.40 13 Cash Adj. EBITDA 79.60 $ 87.40 14 15 16 17 18 27 28 Capital Structures EBITDA Bridge Pro Forma For Acquisition +