Credit, LBO & Downside Model
Operating performance drives cash flow; cash flow changes debt; debt changes lender protection and equity returns. The model connects those steps rather than analysing them in isolation.
Central findingBase-case value comes from both operating delivery and deleveraging, while stress outcomes are defined by liquidity, covenants and lender recovery, not only the equity return.
Evidence
The result in context
- Base MOIC
- 1.9×
- Money-on-invested-capital multiple.
- Base IRR
- 14%
- Annualised equity return implied by timing and cash flows.
- Base net leverage
- 4.0× → 1.7×
- Stress lender recovery range
- 54–98%
On this page
Question
What has to go right, what can go wrong, and who gets paid in each scenario?
An integrated operating, debt, covenant, recovery and equity-returns model built to examine who gets paid across scenarios.
Objective
Start with the business, finish with the capital structure
Revenue and margins feed EBITDA, working capital, cash taxes and capital expenditure. Those operating outputs determine liquidity, debt paydown, covenant headroom and ultimately investor returns.
The model follows a consistent investment-analysis flow: Business → Cash Flow → Capital Structure → Downside → Returns.
Interactive evidence
Revenue paths separate early and remain impaired in stress
Modelled revenue by Base, Downside and Stress, FY2025–FY2029. Value Creation is shown separately through its committed bridge.
Read: Base revenue grows from £215.25m to £254.23m; stress revenue falls to £177.28m before recovering to £184.45m.
Data table · 5 verified rows
| Year | Base Revenue Gbp M | Base Ebitda Gbp M | Downside Revenue Gbp M | Downside Ebitda Gbp M | Stress Revenue Gbp M | Stress Ebitda Gbp M | Date |
|---|---|---|---|---|---|---|---|
| FY2025 | 215.25 | 36.5925 | 205 | 30.75 | 188.6 | 23.575 | 2025-01-01 |
| FY2026 | 226.0125 | 39.100163 | 200.9 | 28.5278 | 177.284 | 19.855808 | 2026-01-01 |
| FY2027 | 236.183063 | 41.332036 | 202.909 | 29.421805 | 177.284 | 20.919512 | 2027-01-01 |
| FY2028 | 245.630385 | 43.722209 | 206.96718 | 31.045077 | 180.82968 | 23.507858 | 2028-01-01 |
| FY2029 | 254.227448 | 45.760941 | 213.176195 | 33.04231 | 184.446274 | 25.822478 | 2029-01-01 |
Interactive evidence
EBITDA compression drives the downside capital-structure result
Modelled EBITDA by scenario, FY2025–FY2029. Value Creation remains represented by its separate committed bridge.
Read: Stress EBITDA reaches a £19.86m trough in FY2026 and remains at £25.82m in FY2029, versus £45.76m in Base.
Data table · 5 verified rows
| Year | Base Revenue Gbp M | Base Ebitda Gbp M | Downside Revenue Gbp M | Downside Ebitda Gbp M | Stress Revenue Gbp M | Stress Ebitda Gbp M | Date |
|---|---|---|---|---|---|---|---|
| FY2025 | 215.25 | 36.5925 | 205 | 30.75 | 188.6 | 23.575 | 2025-01-01 |
| FY2026 | 226.0125 | 39.100163 | 200.9 | 28.5278 | 177.284 | 19.855808 | 2026-01-01 |
| FY2027 | 236.183063 | 41.332036 | 202.909 | 29.421805 | 177.284 | 20.919512 | 2027-01-01 |
| FY2028 | 245.630385 | 43.722209 | 206.96718 | 31.045077 | 180.82968 | 23.507858 | 2028-01-01 |
| FY2029 | 254.227448 | 45.760941 | 213.176195 | 33.04231 | 184.446274 | 25.822478 | 2029-01-01 |
Downside
Equity is only one part of the answer
The stress analysis tests how far performance can fall before liquidity or covenants constrain the business, then estimates recoveries across the debt stack.
Stress lender recovery ranges from 54% to 98% across the modelled cases. That range makes assumptions about enterprise value, debt seniority and cash availability explicit.
Interactive evidence
Investment scenario explorer
Follow each scenario from operations through debt and into investor outcomes.
- EBITDA
- Base operating plan
- Liquidity
- Positive headroom
- Debt
- Deleveraging
- Net leverage
- 4.0× → 1.7×
- Covenants
- Headroom maintained
- Lender recovery
- Protected in modelled range
- MOIC
- 1.9×
- IRR
- 14.0%
Operating delivery and debt paydown both contribute to the base equity return.
Interactive evidence
Stress liquidity falls below the £8m operating floor
Ending liquidity, defined as cash plus undrawn RCF, against the exact minimum-liquidity reference.
Read: Stress liquidity falls to £4.83m in FY2027 and zero in FY2028–FY2029, while Base ends at £52.41m.
Data table · 5 verified rows
| Year | Minimum Liquidity Gbp M | Base | Downside | Stress | Date |
|---|---|---|---|---|---|
| FY2025 | 8 | 42.142681 | 39.2 | 31.21925 | 2025-01-01 |
| FY2026 | 8 | 44.43502 | 38.468768 | 18.780285 | 2026-01-01 |
| FY2027 | 8 | 46.837721 | 38.285895 | 4.83329 | 2027-01-01 |
| FY2028 | 8 | 49.604157 | 39.014183 | 0 | 2028-01-01 |
| FY2029 | 8 | 52.410744 | 40.247091 | 0 | 2029-01-01 |
Interactive evidence
Binding covenant headroom turns negative in downside and stress
Minimum covenant headroom by scenario and year; 10% marks warning and 0% marks breach.
Read: Downside breaches in FY2026–FY2027; stress headroom is negative throughout and reaches −100% when liquidity is exhausted.
Data table · 5 verified rows
| Year | Date | Base | Downside | Stress | Warning | Breach |
|---|---|---|---|---|---|---|
| FY2025 | 2025-01-01 | 13.944639 | 0.33166 | -37.878788 | 10 | 0 |
| FY2026 | 2026-01-01 | 21.875984 | -3.464479 | -69.189504 | 10 | 0 |
| FY2027 | 2027-01-01 | 23.843644 | -4.257358 | -78.923073 | 10 | 0 |
| FY2028 | 2028-01-01 | 34.375325 | 2.257574 | -100 | 10 | 0 |
| FY2029 | 2029-01-01 | 38.06115 | 4.220411 | -100 | 10 | 0 |
Interactive evidence
Stress recovery remains impaired even at the highest tested multiple
Lender recovery at trough EBITDA across 5–9× enterprise-value multiples.
Read: The stress case rises from 54.36% recovery at 5× to 97.85% at 9×, while base remains fully covered throughout.
Data table · 15 verified rows
| Scenario | Multiple | Recovery Pct |
|---|---|---|
| Base | 5 | 100 |
| Base | 6 | 100 |
| Base | 7 | 100 |
| Base | 8 | 100 |
| Base | 9 | 100 |
| Downside | 5 | 89.330828 |
| Downside | 6 | 100 |
| Downside | 7 | 100 |
| Downside | 8 | 100 |
| Downside | 9 | 100 |
| Stress | 5 | 54.36224 |
| Stress | 6 | 65.234687 |
| Stress | 7 | 76.107135 |
| Stress | 8 | 86.979583 |
| Stress | 9 | 97.852031 |
Returns
The value-creation bridge separates the sources of outcome
The base case produces 1.9× MOIC and 14% IRR. The value-creation case reaches 3.1× MOIC and 25.1% IRR, but those headline returns are presented alongside the operating and exit assumptions required to produce them.
MOIC shows how many pounds are returned per pound invested; IRR annualises that result while accounting for timing.
Interactive evidence
The value-creation case separates operating change from deleveraging
Equity value bridge, £m.
Read: EBITDA growth, margin improvement, debt paydown and accumulated cash bridge entry equity to £497.0m; no multiple expansion is assumed.
Data table · 7 verified rows
| Item | Amount Gbp M | Cumulative Equity Gbp M |
|---|---|---|
| Entry Equity Value | 151.27 | 151.27 |
| EBITDA Growth | 105.578467 | 256.848467 |
| Operational Improvement / Margin Expansion | 112.233686 | 369.082152 |
| Multiple Expansion / (Contraction) | 0 | 369.082152 |
| Debt Paydown / Deleveraging | 102.949287 | 472.031439 |
| Cash Accumulation | 24.990796 | 497.022235 |
| Exit Equity Value | 497.022235 | 497.022235 |
Interactive evidence
MOIC rises with the neutral base-case exit multiple
Official sensitivity slice: 1.0× EBITDA factor, 9.0× entry multiple and no interest-rate shock.
Read: MOIC rises from 1.22× at a 6× exit multiple to 2.35× at 10×; the 8.5× base point is 1.93×.
Base-case neutral sensitivity slice; it is not a scenario control.
Data table · 6 verified rows
| Exit Multiple | Moic | Irr Pct | Exit Label |
|---|---|---|---|
| 6 | 1.220709 | 4.069257 | 6× Exit |
| 7 | 1.502789 | 8.487482 | 7× Exit |
| 8 | 1.78487 | 12.284885 | 8× Exit |
| 8.5 | 1.92591 | 14.005862 | 8.5× Exit |
| 9 | 2.06695 | 15.62879 | 9× Exit |
| 10 | 2.34903 | 18.625404 | 10× Exit |
Interactive evidence
IRR shows the same exit-assumption sensitivity
Official sensitivity slice: 1.0× EBITDA factor, 9.0× entry multiple and no interest-rate shock.
Read: IRR rises from 4.07% at 6× to 18.63% at 10×; the 8.5× base point is 14.01%.
Base-case neutral sensitivity slice; it is not a scenario control.
Data table · 6 verified rows
| Exit Multiple | Moic | Irr Pct | Exit Label |
|---|---|---|---|
| 6 | 1.220709 | 4.069257 | 6× Exit |
| 7 | 1.502789 | 8.487482 | 7× Exit |
| 8 | 1.78487 | 12.284885 | 8× Exit |
| 8.5 | 1.92591 | 14.005862 | 8.5× Exit |
| 9 | 2.06695 | 15.62879 | 9× Exit |
| 10 | 2.34903 | 18.625404 | 10× Exit |
Implementation
One model, traceable scenario changes
Scenario inputs propagate through operating performance, cash flow, debt and returns without disconnected spreadsheet overrides. Each displayed state is a complete modelled scenario.
Interactive evidence
Downside leverage stays elevated; stress leverage first increases
Net debt / EBITDA, FY2025–FY2029.
Read: The stress path peaks at 8.50× before deleveraging to 6.75×, while base reaches 1.67× by FY2029.
Data table · 5 verified rows
| Year | Base | Downside | Stress | Date |
|---|---|---|---|---|
| FY2025 | 3.951346 | 4.893496 | 6.772248 | 2025-01-01 |
| FY2026 | 3.369226 | 5.139284 | 8.459475 | 2026-01-01 |
| FY2027 | 2.815537 | 4.839419 | 8.498846 | 2027-01-01 |
| FY2028 | 2.238594 | 4.397379 | 7.593206 | 2028-01-01 |
| FY2029 | 1.672473 | 3.901421 | 6.752838 | 2029-01-01 |
Limitations
What this evidence does not establish
- The company and scenarios are model constructs; the outputs are not a recommendation or realised investment performance.
- Recovery estimates remain sensitive to enterprise-value and timing assumptions in severe downside cases.
Source and reproducibility
Trace the evidence
Source code, evaluation outputs and supporting material are available in the repository.
View repository- Value creation bridgedata/processed/value_creation_bridge.csvCommit / evidence ID: 6ec1e57630998792ba36f350f4f9cda87140dea7
- Recovery sensitivitydata/processed/recovery_analysis.csvCommit / evidence ID: 6ec1e57630998792ba36f350f4f9cda87140dea7