J.P.Morgan Investment Banking
APPENDIX
Leveraged buyout analysis - K-2 case, 62% leverage
Assumptions
Entry assumptions
Date
Purchase price per share
Cost of debt
Full-year 2006E EBITDA
Exit ass um ptions
Date
Management promote
Exit FV/EBITDA multiple
Terminal year EBITDA
Sources & us es
Sources
New LBO debt
New equity
Total sources
Us es
Equity purchase price
Refinanced debt
Transaction value
Transaction fees
Totaluses
6/30/06
$75.00
7.50%
$240
6/30/11
10.0%
12.5x
$345
$2,230
1,450
$3,680
$2,918
662
$3,580
100
$3,680
Projections
Adjusted cash EBITDA¹
Plus: Cost synergies
Less: Recurring equity earnings
Less: Depreciation
EBIT
Plus: Cash interest income
Less: Cash interest expense
Plus: Capitalized interest adj
Pre-tax income
Less: Tax expens e
Net income
Plus: Depreciation
Plus: Reethi Rah notes monetization
Plus: Cape Town notes monetization
Plus: Kana hura notes monetization
Plus: Land sale
Less: Capex
Less: Dev. Proj. Investments
Less: Project advances
Less: Lux (repayments)/issuances
Plus: CF from AC land sale
Less: Increases in NWC
Plus: Palmilla dividend
Plus: Dividend income
Available CF for paydown
Internal rate of return
Credit statistics
2010E
2011E
$102
$416
5
2006E 2007E 2008E 2009E
$290 $347 $378 $404
5
5
5
5
(10) (17) (22) (27) (28)
(90) (98)
(99)
(100) (99)
$195 $236 $262 $282 $294
1
1
(195) (189) (172)
1
1
(140)
0
1
(107)
0
18
$66
0
$90
32
$32
0
$32
0
0
$90
99
$142 $187
0
0
$142 $187
100
99
90
0
0
0
0
0
0
0
0
0
0
0
(88)
0
0
0
0
0
13
Total debt/EBITDA
Total debt/Purchase price
3
(6)
(36
$63
0
(90)
26
($1)
0
($1)
36
0
0
0
0
(263)
(97)
0
(1)
0
7
0
14
(192)
(28)
(20)
(12)
0
1
19.6%
$66
98
76
6/30/06
9.3x
62%
EBITDA/interest
NA
Note: Valuation date 6/30/06; 2006E adjusted to reflect only Q3-Q4 stub period
¹ Differs from EBITDA in that it includes non-recurring equity earnings and land sales per K-2 model
JPMorgan
0
0
0
(75)
0
(0)
1
0
8
47
65
($304) ($81) $243
5
1
10
2
0
(80)
0
10
2
10
3
0
(3)
13
20
4
$200 $652 $215
40
0
467
(2)
9
(85)
0
2006E
2007E 2008E 2009E 2010E
9.1x 6.9x
5.8x
3.8x
10.7x
71%
1.13x 1.49x
74%
67%
61%
43%
1.84x
2.20x
2.88x
4
2011E
3.2x
37%
3.87x
Exit EBITDA adjustment
2011E EBITDA
Less: Mohegan 2011E CF
Adjusted exit EBITDA
Equity value per share
IRR:
Price
18.0%
20.0%
22.0%
Internal rate of return
$75.00
$80.00
$85.00
IRR:
Exit FVIEBITDA multiple
11.5×
$74.15
70.59
68.22
18.0%
20.0%
22.0%
12.5
$77.28
74.86
72.24
Debt to cap on entry
65.0%
20.3%
17.9
15.6
62.3%
19.6%
17.3
15.0
Implied entry FW/EBITDA multiple
Exit FVIEBITDA multiple
11.5x
14.8x
14.3
13.9
12.5x
15.3x
14.8
14.3
$416
(43)
$373
13.5x
$80.42
77.56
74.71
67.0%
20.9%
18.4
16.0
13.5x
15.9x
15.3
14.8
PROJECT PLATO 24View entire presentation