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Ridgeline Infrastructure Services · RDGL

DEMO DATAUNDERWRITING ASSUMPTIONHOLD
Five-minute case summary

Ridgeline Infrastructure Services

DEMO DATAUNDERWRITING ASSUMPTION
HOLD
1
The opportunity
Demo purchase of $100M face of Senior Notes 6.25% at 95.0 (cash investment $95.5M): current yield 6.6%, yield to maturity 7.3%.
2
The question
Does a 7.3% yield on a rank-3 unsecured claim compensate for 15% probability-weighted default risk and 0% severe-case loss?
3
The thesis
Contracted utility spend gives visible cash flow, but 4x net leverage and working-capital intensity warrant a wider spread than the current mark offers.
4
The risk (what causes loss)
  • Severe case produces a payment default in FY2030E.
  • Unsecured, rank 3: $880M of debt ranks ahead.
  • Weakest credit-score factor: Leverage (9.2 of 15 points).
  • Project execution / fixed-price overruns
5
The protection
  • Severe-case valuation recovery of 100% covers the 95.0 purchase price (principal protected).
  • Coverage of 3.46x EBITDA / interest; EBITDA can fall 71% before coverage reaches 1.0x.
  • Moderate leverage: net debt / EBITDA 3.9x.
  • Base-case refinancing tests pass for all 2 maturing tranche(s); 2 are repaid from cash.
6
The base case
Base case (55%): revenue 4.0% in FY2026E, EBITDA margin 18.0%; no default; IRR 8.0%, MOIC 1.24x vs 12% hurdle.
7
The downside
Downside (30%): EBITDA $299M at the trough, peak net leverage 4.4x, covenants hold; no default; IRR 4.7%. Severe (15%): default in FY2030E, IRR 6.5%.
8
The recovery
If the company defaults, recovery value is $1.5B (going concern) in the severe case → 100% recovery (0% LGD) on the target tranche; downside 100%.
9
The decision
HOLD. HOLD (do not size yet): Base-case IRR clears hurdle (8.0% vs ≥ 12.0%); Expected-cash-flow IRR (probability-weighted) clears hurdle (6.8% vs ≥ 12.0%); Entry yield meets minimum (7.3% vs ≥ 9.0%).

Generated from the structured model (no free-text generation beyond the analyst’s thesis and risk lists). Hypothetical terms are underwriting assumptions; nothing here is a real transaction.