Who benefits from the leverage in LBOs? - Said Business School ...

Table III - Illustrative sources and uses of funds scheme
This table shows a typical “sources and uses of funds” scheme that is part of each LBO structuring process.
This example comes from the LBO of HCA Inc. in 2006. The right-hand side lists the amounts of capital
needed to complete the takeover. Typical positions are the purchase price of target’s equity, the rollover
equity by the retained management, the repayment of existing debt, as well as the costs resulting from the
transaction. In this example a portion of target’s existing debt is retained and listed on both sides. The lefthand
side shows the sources of capital to fund the takeover. Beside multiple layers of debt, equity from the
private equity investors, the rolled-over management stake, as well as cash at hand of target (in this case
dividends from a subsidiary) are typical positions.
Sources of Funds $mn Uses of Funds $mn
Senior Secured Credit Facilities Equity Purchase Price 20,214
Asset Based Revolving Credit Facility 1,750 Rollover Equity 1,065
Revolving Credit Facility 188 Repayment of existing Indebtness 3,714
Term Loan A Facility 2,750 Retained existing Secured Indebtness 230
Term Loan B Facility 8,800 Retained existing Unsecured Indebtness 7,473
European Term Loan Facility 1,250 Transaction Costs 776
New Notes 5,700
Retained existing Secured Indebtness 230
Retained existing Unsecured Indebtness 7,473
Equity Contribution 3,901
Rollover Equity 1,065
HCI Dividend 365
Total Sources of Funds 33,472 Total Uses of Funds 33,472
Source: Securities and Exchange Commission.
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