Module II· EV-Equity BridgeIntermediate
Question
How do you define net debt — and which items are often disputed?
Answer
Mechanics
The standard net-debt definition:
```
Net Debt = Total Interest-Bearing Debt − Cash & Cash Equivalents
```
Clearly in
bank loans, bonds, privately-placed corporate loans, short-term credit lines.
Clearly not in
trade receivables, tax liabilities.
Disputed items (buyer/seller negotiation)
- Reverse factoring (supplier programs) − debt-like?
- Customer deposits / advances − operating or financing?
- Drawn-down letters of credit.
- Frozen cash (guarantees, escrows).
Jurisdiction-specific
privately-placed corporate loans are clearly debt, while profit-participation rights are often disputed.
Deep diveShow more details
Pitch tip
For due-diligence pitches, state the net-debt definition explicitly − a $50m disagreement is normal.