Module VI· Debt Schedule MechanicsIntermediate
Question

How do you model a bullet tranche in the debt schedule?

Answer

A bullet tranche has no required principal amortization until maturity. Opening debt remains outstanding unless optional repayments are allowed. Interest is paid each period on the outstanding balance. At maturity, the full principal is repaid or refinanced. In LBO models, bullet debt helps preserve cash flow for deleveraging other tranches.