Stout was engaged by Guidehouse to provide a solvency opinion related to a proposed recapitalization. In connection with a nearly $800-million acquisition, Guidehouse recapitalized, whereby it extinguished existing debt of approximately $1.2 billion and replaced it with a new facility that consisted of a $2.7-billion debt facility, a $200-million revolver facility, and a $750-million preferred equity security. Proceeds from the new financing were used to fund the acquisition and make a distribution to shareholders of approximately $1.6 billion.

Stout’s analysis relied on projected cash flows as well as trading multiples of comparable publicly traded companies and recent mergers and acquisitions of similar companies to assess the viability of the post-refinancing capital structure. In addition, we performed an analysis to determine the ability of the company to satisfy its post-refinancing debt obligations. Our work also included a sensitivity analysis to provide management with an understanding of the company’s ability to continue satisfying debt obligations and operate the business without undue stress in the event of unexpected turbulence resulting in lower-than-expected future cash flows.

We issued an opinion that Guidehouse should remain solvent subsequent to the refinancing and distribution. This enabled the company’s board of directors to recommend the transaction with confidence, and Guidehouse subsequently undertook the deal successfully.