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Calculate gross leverage and net leverage

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Reference no: EM133110071

Bright Semiconductor specializes in semiconductors that are used in autos, communication equipment, and industrial machinery, which are cyclical industries. This high-yield-rated company's debt structure is complicated because of the many levels of seniority that resulted from the company's 2006 leveraged buyout by a consortium of private equity firms. Below is a simplified depiction of the company's debt structure and some key credit-related statistics.

Bright Semiconductor Financial Information (in Millions)

Cash

$1,050

Total Debt

$7,611

Net Debt

$6,561

Interest Expense

$590

EBITDA

$990

Debt Structure (in Millions)

Secured Debt (Bank Loan and Bonds)

$4,899

Senior Unsecured Bonds

$1,948

Subordinated Bonds

$764

Total Debt

$7,611

Using the Information Provided, address the following: 

  1. Calculate gross leverage and net leverage, as measured by Debt/EBITDA, through each level of debt, including total debt. 
  2. Why might Bright Co have so much secured debt relative to unsecured debt (both senior and subordinated)? 

Reference no: EM133110071

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