Morgan Stanley Investment Banking Pitch Book
.
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Project Roosevelt
Since 2008, Monroe has
accumulated an NOL balance
of -$433MM as of 12/31/15
Management projects positive
taxable income in 2016 (mainly
due to termination fee income)
and consistent positive taxable
income starting in 2018
• If taxable income remains
positive after 2018, all NOLS
must be utilized (or expire) by
2038
• Tax savings from NOLS
discounted at Monroe's
weighted average cost of
capital with an applied 43% tax
rate to estimate present value
- Weighted average cost of
capital used as discount rate
includes tax-affected cost of
debt
Disclaimer: Morgan Stanley does not
provide tax, accounting or legal advice and
the information contained herein does not
constitute such advice or any other form of
advice for the recipient.
Morgan Stanley
MONROE VALUATION
Net Operating Loss Valuation
Utilization Assuming Status Quo Case
Monroe Taxable Income
$000s
Discount Rate
NOL Value Sensitivity
SMM
2007A
2008.A
2009A
2010A
2011A
2012A
2013A
2014A
2015A
2016E
2017E
2018E
2019E
678 (11,144) (19,078) (102,151) (87,514) (55,808) (43,589) (48,563) (28,143) 14,803 (2,285) 5,887 12,662
8.1%
8.7%
9.3%
0.0%
Taxable Income Growth After 2019
2.5%
5.0%
7.5%
49.0
46.6
44.3
56.8
53.8
51.0
65.6
61.8
58.4
69.2
65.4
61.9
10.0%
72.1
68.3
64.7
Strictly Confidential
Assumptions
43% Corporate Tax Rate
Taxable Income per management projections
through 2019, grown at designated growth rate
thereafter
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Additional Notes
A buyer's value for any NOLS would be based on utilization in any given year collared by the projected year's
taxable income and the maximum amount allowable under the IRS code section 382
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In a change of control transaction, use of NOLS will generally be limited to an annual amount equal to the product
of the purchase price paid for the target equity multiplied by a rate published monthly by the IRS (most recent rate
is 2.65%); most NOLS have a 20-year life
Asset sales in the first five years post-acquisition will generally be treated as exceptions to the 382 limitation
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