{"id":29621,"date":"2024-07-10T10:19:19","date_gmt":"2024-07-10T15:19:19","guid":{"rendered":"https:\/\/breakingintowallstreet.com\/?post_type=biws_kb&#038;p=29621"},"modified":"2025-01-29T23:24:19","modified_gmt":"2025-01-30T04:24:19","slug":"debt-sculpting-vs-debt-sizing","status":"publish","type":"biws_kb","link":"https:\/\/breakingintowallstreet.com\/kb\/project-finance\/debt-sculpting-vs-debt-sizing\/","title":{"rendered":"Debt Sculpting vs Debt Sizing in Project Finance: Full Tutorial"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-flat ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Debt Sculpting vs Debt Sizing in Project Finance: Full Tutorial<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/breakingintowallstreet.com\/kb\/project-finance\/debt-sculpting-vs-debt-sizing\/#Simple_Debt_Sculpting_vs_Debt_Sizing_Example\">Simple Debt Sculpting vs Debt Sizing Example<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/breakingintowallstreet.com\/kb\/project-finance\/debt-sculpting-vs-debt-sizing\/#Simple_Debt_Sculpting_vs_Debt_Sizing_Example_Based_on_the_Debt_Service_Coverage_Ratio_DSCR\">Simple Debt Sculpting vs Debt Sizing Example Based on the Debt Service Coverage Ratio (DSCR)<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/breakingintowallstreet.com\/kb\/project-finance\/debt-sculpting-vs-debt-sizing\/#Improved_Debt_Sculpting_vs_Debt_Sizing_with_the_Loan_Life_Coverage_Ratio_LLCR\">Improved Debt Sculpting vs Debt Sizing with the Loan Life Coverage Ratio (LLCR)<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/breakingintowallstreet.com\/kb\/project-finance\/debt-sculpting-vs-debt-sizing\/#Why_Debt_Sizing_Creates_Circular_References\">Why Debt Sizing Creates Circular References<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/breakingintowallstreet.com\/kb\/project-finance\/debt-sculpting-vs-debt-sizing\/#Debt_Sculpting_vs_Debt_Sizing_with_a_CopyPaste_VBA_Macro\">Debt Sculpting vs Debt Sizing with a Copy\/Paste VBA Macro<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/breakingintowallstreet.com\/kb\/project-finance\/debt-sculpting-vs-debt-sizing\/#Debt_Sculpting_vs_Debt_Sizing_More_Advanced_Topics\">Debt Sculpting vs Debt Sizing: More Advanced Topics<\/a><\/li><\/ul><\/nav><\/div>\n\n<blockquote><p><strong>Debt Sculpting vs Debt Sizing Definition:<\/strong> In Project Finance, Debt Sculpting means that the required principal repayment in each period changes based on the available cash flows, the interest expense, and the targeted coverage ratio; Debt Sizing means that you set the initial Debt balance such that it is completely repaid on a certain date based on these sculpted principal repayments and the other Debt terms.<\/p><\/blockquote>\n<p>In most financial models for \u201cnormal companies,\u201d such as <a href=\"https:\/\/mergersandinquisitions.com\/lbo-modeling-test\/\" target=\"_blank\" rel=\"noopener\">leveraged buyout models<\/a> and <a href=\"https:\/\/breakingintowallstreet.com\/kb\/debt-equity\/debt-vs-equity-analysis\/\" target=\"_blank\" rel=\"noopener\">debt vs. equity models<\/a>, the initial Debt balance is based on a multiple of <a href=\"https:\/\/breakingintowallstreet.com\/kb\/accounting\/ebitda\/\" target=\"_blank\" rel=\"noopener\">EBITDA<\/a> or a percentage of the purchase price.<\/p>\n<p><strong>But in Project Finance, Debt tends to be sculpted and sized based on the future cash flows because these cash flows are very predictable due to contracts that lock in prices and volumes, such as power purchase agreements (PPAs) in the energy sector.<\/strong><\/p>\n<p>Some assets, such as solar and wind plants, are <em>seasonal<\/em>, so their cash flows fluctuate each month, but they are still <em>predictable<\/em> because we know the high and low seasons in advance.<\/p>\n<p>Linking the <strong>Debt Service<\/strong> \u2013 the Interest Expense + Principal Repayments \u2013 to the cash flow in each period <strong>reduces the risk for the lenders<\/strong> because it allows for more repayment when the cash flows are stronger and less when they are weaker.<\/p>\n<p>Equity investors also like this approach because it often means they can <strong>use more Debt<\/strong> to fund deals, which increases their potential returns if a development or acquisition performs well.<\/p>\n<p>Debt based on a multiple of the project\u2019s initial EBITDA <strong>would ignore future cash-flow growth<\/strong> and, therefore, increase the required Equity by reducing the initial Debt.<\/p>\n<p>By linking the Debt to these future cash flows, investors ensure the maximum Debt possible is used, within the constraints desired by the lenders.<\/p>\n<h3><strong>Files &amp; Resources:<\/strong><\/h3>\n<ul>\n<li><a href=\"https:\/\/youtube-breakingintowallstreet-com.s3.us-east-1.amazonaws.com\/PF\/PF-02\/PF-02-Debt-Sculpting-vs-Debt-Sizing-Slides.pdf\" target=\"_blank\" rel=\"noopener\">Debt Sculpting vs Debt Sizing \u2013 Presentation Slides (PDF)<\/a><\/li>\n<li><a href=\"https:\/\/youtube-breakingintowallstreet-com.s3.us-east-1.amazonaws.com\/PF\/PF-02\/PF-02-LLCR-Debt-Sizing.xlsx\" target=\"_blank\" rel=\"noopener\">Simple \u201cCash Flow Only\u201d Debt Sculpting vs Debt Sizing with No VBA or Circular References (XL)<\/a><\/li>\n<li><a href=\"https:\/\/youtube-breakingintowallstreet-com.s3.us-east-1.amazonaws.com\/PF\/PF-02\/PF-02-VBA-Debt-Sizing.xlsm\" target=\"_blank\" rel=\"noopener\">Debt Sizing and Sculpting with VBA\/Macro Support (XLSM)<\/a><\/li>\n<\/ul>\n<h3><strong>Video Table of Contents:<\/strong><\/h3>\n<ul>\n<li><strong>0:00:<\/strong> Introduction<\/li>\n<li><strong>1:09:<\/strong> Part 1: The TL;DW of Debt Sculpting and Sizing<\/li>\n<li><strong>3:07:<\/strong> Part 2: Simple Debt Sculpting Example<\/li>\n<li><strong>4:49:<\/strong> Part 3: DSCR-Based Debt Sizing<\/li>\n<li><strong>7:10:<\/strong> Part 4: LLCR-Based Debt Sizing<\/li>\n<li><strong>9:25:<\/strong> Part 5: VBA to Automate Debt Sizing and Avoid Circ Ref\u2019s<\/li>\n<li><strong>17:24:<\/strong> Recap and Summary<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Simple_Debt_Sculpting_vs_Debt_Sizing_Example\"><\/span><strong>Simple Debt Sculpting vs Debt Sizing Example<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>\u201cSculpting\u201d Debt is not complicated; the tricky part is sizing it initially.<\/p>\n<p>Here&#8217;s a simple example of Debt Sculpting: Let&#8217;s say the Cash Flow in a period is $150, and the targeted <a href=\"https:\/\/breakingintowallstreet.com\/kb\/project-finance\/debt-service-coverage-ratio\/\" target=\"_blank\" rel=\"noopener\">Debt Service Coverage Ratio (DSCR)<\/a> is 1.5x.<\/p>\n<p>The asset can, therefore, support Debt Service of $150 \/ 1.5x = $100.<\/p>\n<p>If the initial Debt balance is $800 with a 10% interest rate, the Interest Expense is $80.<\/p>\n<p>Therefore, the \u201csculpted\u201d principal repayment in this period is $100 \u2013 $80 = $20. This will increase each year as the Cash Flow grows and the Interest Expense falls.<\/p>\n<p>The\u00a0<strong>hard part<\/strong> is the Debt Sizing &#8211; in other words, determining that this initial balance\u00a0<em>should be<\/em> $800 (see below).<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Simple_Debt_Sculpting_vs_Debt_Sizing_Example_Based_on_the_Debt_Service_Coverage_Ratio_DSCR\"><\/span><strong>Simple Debt Sculpting vs Debt Sizing Example Based on the Debt Service Coverage Ratio (DSCR)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The simplest approach to Debt Sizing is to base it on a key credit metric in Project Finance: <strong>The Debt Service Coverage Ratio (DSCR) or the Loan Life Coverage Ratio (LLCR).<\/strong><\/p>\n<p>The required formulas are as follows:<\/p>\n<ul>\n<li><strong>Cash Flow Available for Debt Service (CFADS)<\/strong> = EBITDA \u2013 Maintenance Capex +\/- Change in Working Capital \u2013 Cash Taxes<\/li>\n<li><strong>Debt Service Coverage Ratio (DCSR)<\/strong> = CFADS in One Year \/ Debt Service in One Year<\/li>\n<li><strong>Loan Life Coverage Ratio (LLCR)<\/strong> = Present Value of All CAFDS in Remaining Debt Tenor \/ Current Debt Balance<\/li>\n<\/ul>\n<p>The LLCR is the \u201cPresent Value version\u201d of the DSCR, and <strong>the two are equivalent when we size and sculpt the Debt based on one or the other<\/strong> (with some exceptions in more advanced cases).<\/p>\n<p>We\u2019ll start with a simple Debt Sizing example based on the DSCR.<\/p>\n<p>If we\u2019ve projected the <a href=\"https:\/\/breakingintowallstreet.com\/kb\/project-finance\/cash-flow-available-for-debt-service-cfads\/\" target=\"_blank\">CFADS<\/a> for an asset, Step 1 is to \u201cguess\u201d the initial Debt balance ($800 in this ongoing example).<\/p>\n<p>Then, we calculate the Interest Expense, Max Debt Service, and Debt Amortization in each period based on the interest rate (10%) and the minimum or targeted DSCR (1.50x here).<\/p>\n<p>Max Debt Service = CFADS \/ DSCR, so it is $150 \/ 1.5x = $100 in Year 1.<\/p>\n<p>We \u201cback into\u201d the Max Debt Amortization based on the Max Debt Service minus the Interest Expense this year:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-29622 size-full\" title=\"The DSCR for Debt Sculpting vs Debt Sizing\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100213\/01-DSCR-Sculpting.jpg\" alt=\"The DSCR for Debt Sculpting vs Debt Sizing\" width=\"1224\" height=\"992\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100213\/01-DSCR-Sculpting.jpg 1224w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100213\/01-DSCR-Sculpting-300x243.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100213\/01-DSCR-Sculpting-1024x830.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100213\/01-DSCR-Sculpting-768x622.jpg 768w\" sizes=\"(max-width: 1224px) 100vw, 1224px\" \/><\/p>\n<p><strong>With these assumptions, the Debt balance reaches $0 by Year 10, but the DSCR is 1.52x in this final year, which means we used too little Debt initially.<\/strong><\/p>\n<p>Therefore, we need to\u00a0<em>resize<\/em> the initial Debt balance.<\/p>\n<p>To do this, we can set the initial balance to a higher number, such as $850, and then use <strong>Goal Seek<\/strong> (Alt, A, W, G in PC Excel) in the Year 10 cell to find the initial balance that results in a $0 balance in Year 10.<\/p>\n<p>This is the simplest possible method for Debt Sizing, but\u00a0it lacks flexibility and is cumbersome to use in models because we need to use Goal Seek whenever anything changes.<\/p>\n<div class='code-block code-block-11' style='margin: 8px 0; clear: both;'>\n<div class=\"kb-adinsert-modal\">\n    <div class=\"kb-adinsert-top\">\n      <div class=\"media\">\n          <img decoding=\"async\" class=\"alignnone size-full wp-image-28448\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/11\/19235107\/building.png\" alt=\"Project Finance & Infrastructure Modeling\" width=\"128\" height=\"128\" \/>\n      <\/div>\n      <div class=\"content\">\n          <h3>Master Project Finance Modeling for Energy, Transportation, and Mining Assets<\/h3>\n      <\/div>\n    <\/div>\n    \n    <div class=\"full_text\">\n    \t<ul>\n        \t<li>\n            \t<h4>Evaluate infrastructure deals like a pro<\/h4>\n              <p>You\u2019ll evaluate the risks and rewards and make investment recommendations<\/p>\n\t\t\t    <\/li>\n          <li>\n          \t<h4>Master financial modeling<\/h4>\n            <p>Model solar, wind, gas, nuclear, toll road, airport, and mining assets<\/p>\n\t\t\t    <\/li>\n          <li>\n          \t<h4>Complete 8 case studies<\/h4>\n            <p>Build 4 shorter \u201ccrash course\u201d models and 4 detailed \u201con the job\u201d ones\n\n<\/p>\n\t\t\t  <\/li>\n      <\/ul>\n        \n      <a class=\"cta-link orange-button-medium\" href=\"https:\/\/breakingintowallstreet.com\/project-finance-modeling\/\" target=\"_blank\">Full Details<\/a>\n      \n      <a class=\"cta-link orange-button-medium bg-blue\" href=\"https:\/\/biws-support.s3.us-east-1.amazonaws.com\/Course-Outlines\/Project-Finance-Modeling-Course-Outline.pdf\" target=\"_blank\" rel=\"noopener\">Short Outline<\/a>\n    <\/div>\n<\/div>\n<\/div>\n\n<h2><span class=\"ez-toc-section\" id=\"Improved_Debt_Sculpting_vs_Debt_Sizing_with_the_Loan_Life_Coverage_Ratio_LLCR\"><\/span><strong>Improved Debt Sculpting vs Debt Sizing with the Loan Life Coverage Ratio (LLCR)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>We can resolve some of these issues by sizing the Debt based on the <a href=\"https:\/\/breakingintowallstreet.com\/kb\/project-finance\/loan-life-coverage-ratio\/\" target=\"_blank\" rel=\"noopener\">loan life coverage ratio<\/a> instead.<\/p>\n<p>We can solve for the initial Debt balance using algebra:<\/p>\n<ul>\n<li><strong>Initial LLCR<\/strong> = Present Value (PV) of All CFADS in Entire Debt Tenor \/ Initial Debt Balance<\/li>\n<li><strong>LLCR * Debt Balance<\/strong> = PV of All CFADS<\/li>\n<li><strong>Debt Balance<\/strong> = PV of All CFADS \/ LLCR<\/li>\n<\/ul>\n<p>Here\u2019s the Excel setup:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-29623 size-full\" title=\"LLCR-Based Debt Sizing\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100244\/02-LLCR-Sizing.jpg\" alt=\"LLCR-Based Debt Sizing\" width=\"1508\" height=\"610\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100244\/02-LLCR-Sizing.jpg 1508w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100244\/02-LLCR-Sizing-300x121.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100244\/02-LLCR-Sizing-1024x414.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100244\/02-LLCR-Sizing-768x311.jpg 768w\" sizes=\"(max-width: 1508px) 100vw, 1508px\" \/><\/p>\n<p>The <a href=\"https:\/\/breakingintowallstreet.com\/kb\/finance\/present-value\/\" target=\"_blank\" rel=\"noopener\">Present Value<\/a> from Years 1 to 10 is $1,201.4, so the Initial Debt Balance = $1,201.4 \/ 1.50x = $800.9.<\/p>\n<p><strong>We do not need to change anything else because the targeted DSCR and targeted LLCR are equivalent.<\/strong><\/p>\n<p><strong>So, we can use the targeted LLCR to determine the Max Debt Service in each period; it\u2019s still CFADS \/ 1.50x.<\/strong><\/p>\n<p>This method is better than Goal Seek because everything updates automatically if the CFADS, Interest Rate, or LLCR change.<\/p>\n<p>However, it works only if we ignore the <strong>circular relationship<\/strong> between Interest, Taxes, and Debt Sizing, which comes up when we calculate the Cash Flow Available for Debt Service (CFADS) &#8220;the real way.&#8221;<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Why_Debt_Sizing_Creates_Circular_References\"><\/span><strong>Why Debt Sizing Creates Circular References<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>To explain these issues, we must calculate CFADS by starting with Revenue, subtracting Operating Expenses, and then deducting Maintenance CapEx, Cash Taxes, and the <a href=\"https:\/\/breakingintowallstreet.com\/kb\/financial-statement-analysis\/change-in-working-capital\/\" target=\"_blank\" rel=\"noopener\">Change in Working Capital<\/a>.<\/p>\n<p>Since the Interest Expense is tax-deductible, the Cash Taxes will change based on the Interest Rate, the initial Debt balance, and the Debt principal repayments.<\/p>\n<p>If we set it up this way and make the Interest Expense a tax deduction when calculating Cash Taxes, we get the following \u201ccircular death loop\u201d:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-29624 size-full\" title=\"Circular References from Debt Sizing\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100335\/03-Debt-Sizing-Circular-References.jpg\" alt=\"Circular References from Debt Sizing\" width=\"1512\" height=\"1010\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100335\/03-Debt-Sizing-Circular-References.jpg 1512w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100335\/03-Debt-Sizing-Circular-References-300x200.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100335\/03-Debt-Sizing-Circular-References-1024x684.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100335\/03-Debt-Sizing-Circular-References-768x513.jpg 768w\" sizes=\"(max-width: 1512px) 100vw, 1512px\" \/><\/p>\n<p>We could solve this issue by <strong>enabling circular references in Excel<\/strong>, but that makes models less stable, and some groups do not accept models with circular references (for more, see <a href=\"https:\/\/breakingintowallstreet.com\/kb\/excel\/circular-reference-excel\/\" target=\"_blank\" rel=\"noopener\">our tutorial on circular references in Excel<\/a>).<\/p>\n<p>Another option is to use <strong>pre-tax numbers<\/strong> and ignore the tax deduction for the Interest Expense, but that results in less accurate Debt balances.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Debt_Sculpting_vs_Debt_Sizing_with_a_CopyPaste_VBA_Macro\"><\/span><strong>Debt Sculpting vs Debt Sizing with a Copy\/Paste VBA Macro<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The <strong>real way<\/strong> to fix this problem is to use <a href=\"https:\/\/breakingintowallstreet.com\/kb\/excel\/excel-vba-programming\/\" target=\"_blank\" rel=\"noopener\">VBA<\/a> to create a \u201ccopy \/ paste macro\u201d that \u201ctricks\u201d the model into using a hard-coded of the CFADS rather than the calculated one.<\/p>\n<p>To do this, we\u2019ll <strong>copy<\/strong> the calculated CFADS, <strong>paste<\/strong> it as hard-coded values, and <strong>feed<\/strong> this hard-coded version into the model.<\/p>\n<p>Then, we\u2019ll calculate the CFADS series again, copy and paste them as hard-coded values, feed them into the model, and keep doing that until the calculated and pasted CFADS are the same.<\/p>\n<p>Essentially, we\u2019re \u201ctricking\u201d Excel into thinking that the pasted CFDAS is the same as the calculated CFADS, thereby avoiding true circular references.<\/p>\n<p>To set this up, start by creating a separate \u201cMacros\u201d tab in Excel that can store the calculated and pasted CFADS, and <strong>name each range of cells<\/strong> so you can easily refer to them in the macro.<\/p>\n<p>We\u2019ll also need a \u201cCheck \/ Comparison\u201d cell that sums up each series and determines the difference between them:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-29625 size-full\" title=\"Named Ranges for VBA Copy\/Paste Macro\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100407\/04-VBA-Named-Ranges.jpg\" alt=\"Named Ranges for VBA Copy\/Paste Macro\" width=\"1499\" height=\"456\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100407\/04-VBA-Named-Ranges.jpg 1499w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100407\/04-VBA-Named-Ranges-300x91.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100407\/04-VBA-Named-Ranges-1024x312.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100407\/04-VBA-Named-Ranges-768x234.jpg 768w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100407\/04-VBA-Named-Ranges-325x100.jpg 325w\" sizes=\"(max-width: 1499px) 100vw, 1499px\" \/><\/p>\n<p>Next, on the main Model tab, link the pasted CFADS from the Macros tab and change all the formulas referencing the CFADS to use the <em>pasted version<\/em> instead:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-29626 size-full\" title=\"Model Links for VBA Copy\/Paste Macro\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100513\/05-VBA-Copy-Paste-Links.jpg\" alt=\"Model Links for VBA Copy\/Paste Macro\" width=\"1503\" height=\"859\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100513\/05-VBA-Copy-Paste-Links.jpg 1503w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100513\/05-VBA-Copy-Paste-Links-300x171.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100513\/05-VBA-Copy-Paste-Links-1024x585.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100513\/05-VBA-Copy-Paste-Links-768x439.jpg 768w\" sizes=\"(max-width: 1503px) 100vw, 1503px\" \/><\/p>\n<p>Also, change the NPV formula used in the \u201cPresent Value of CFADS Over Debt Tenor\u201d in the top area to reference these pasted CFADS values.<\/p>\n<p>To <strong>automate<\/strong> this process, we can write a macro to repeat these steps until the sums of the two cell ranges (\u201cCFADS_Paste\u201d and \u201cCFADS_Links\u201d) are equal (i.e., the\u00a0 \u201cCheck \/ Comparison\u201d cell will be 0).<\/p>\n<p>Start by going to the VBA Recorder (Alt, L, R in PC Excel) and setting this macro to the Ctrl + Shift + S shortcut. Then, go to the Macros tab, do the manual copy\/paste, and stop the recording.<\/p>\n<p>Go into the VBA Editor (Alt, L, V), delete the recorded code, and enter the following code to make the process repeat until the pasted and calculated CFADS equal each other:<\/p>\n<p><em>Do<\/em><\/p>\n<p><em>Range(&#8220;CFADS_Paste&#8221;).Value = Range(&#8220;CFADS_Links&#8221;).Value\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/em><\/p>\n<p><em>Loop Until Range(&#8220;Check_CFADS&#8221;).Value = 0<\/em><\/p>\n<p>It should look like this in the VBA Editor:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-29627 size-full\" title=\"VBA Copy\/Paste Macro Code\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100459\/06-VBA-Loop-Code.jpg\" alt=\"VBA Copy\/Paste Macro Code\" width=\"772\" height=\"274\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100459\/06-VBA-Loop-Code.jpg 772w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100459\/06-VBA-Loop-Code-300x106.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/07\/10100459\/06-VBA-Loop-Code-768x273.jpg 768w\" sizes=\"(max-width: 772px) 100vw, 772px\" \/><\/p>\n<p>Now, whenever we change an assumption, such as the minimum LLCR, the Interest Rate, or the Tax Rate, we can press Ctrl + Shift + S to change all the CFADS values and resize the initial Debt balance automatically.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Debt_Sculpting_vs_Debt_Sizing_More_Advanced_Topics\"><\/span><strong>Debt Sculpting vs Debt Sizing: More Advanced Topics<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>This article is just an introduction to the topic.<\/p>\n<p>There are dozens of more advanced points related to Debt Sizing and Debt Sculpting, such as:<\/p>\n<ul>\n<li><strong>Cash flow sweeps<\/strong>, i.e., optional Debt principal repayments based on cash flows.<\/li>\n<li><strong>Variable issuance and maturity dates<\/strong>, which require a system of \u201cflags\u201d to mark different periods.<\/li>\n<li><strong>Monthly and quarterly models<\/strong>, which shift the formulas.<\/li>\n<li><strong>Multiple Debt tranches<\/strong>, such as 1<sup>st<\/sup> lien and 2<sup>nd<\/sup> lien loans that are both sized and sculpted \u2013 or perhaps only one tranche is, and the other is not.<\/li>\n<li><strong>Construction Loans<\/strong> and how they are sized during the development period of a project and linked to the post-development financing.<\/li>\n<\/ul>\n<p>We cover all these points and more in the introductory and more advanced case studies in our <a href=\"https:\/\/breakingintowallstreet.com\/project-finance-modeling\/\" target=\"_blank\" rel=\"noopener\">Project Finance &amp; Infrastructure Modeling course<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In Project Finance, Debt Sculpting means that the required principal repayment in each period changes based on the available cash flows, the interest expense, and the targeted coverage ratio; Debt Sizing means that you set the initial Debt balance such that it is completely repaid on a certain date based on these sculpted principal repayments and the other Debt terms.<\/p>\n","protected":false},"featured_media":0,"template":"","class_list":["post-29621","biws_kb","type-biws_kb","status-publish","hentry","kb_category-project-finance"],"acf":[],"_links":{"self":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/biws_kb\/29621","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/biws_kb"}],"about":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/types\/biws_kb"}],"wp:attachment":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/media?parent=29621"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}