Debt / Loan Fair Value Calculation Excel Template
Originally published: 26/12/2018 09:24
Last version published: 12/05/2022 09:06
Publication number: ELQ-50396-9
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Debt / Loan Fair Value Calculation Excel Template

User-friendly model to extract remaining debt / loan cash flows, derive market rates used to discount cash flows in order to determine the fair value of loan

Description
PURPOSE OF TOOL

User-friendly Excel tool for determining the fair value of a debt facility or loan and other key metrics.


METHODOLOGY

The template calculates the fair value of a debt facility / loan by extracting the remaining cash flows to maturity of the loan and discounting these cash flows at the market interest rates at the valuation date. The market rates are derived by adding the option adjusted spread (reflective of the credit risk of the loan) and any illiquidity premium to the Government bond yield curve, which is assumed to be the risk-free rate. The resulting sum of discounted cash flows is the implied fair value for the loan.


KEY OUTPUTS

The tool computes a number of key loan / debt metrics including:
- Debt facility / loan fair value;
- Debt facility / loan fair value as a percentage of book value;
- Debt facility / loan duration;
- Debt facility / loan yield to maturity;
- A chart plotting the cumulative debt facility / loan cash flows, yield curve and discounting rates.


KEY INPUTS
The key user-defined inputs of the tool include:
- Loan reference name
- Currency
- Valuation date
- Loan balance at valuation date
- Loan type (amortising or bullet)
- Maturity date
- Payment frequency (Monthly, Quarterly, Semi-annually, Yearly)
- Interest rate
- Government Bond Yield curve
- Option adjusted spread
- Illiquidity premium (if required)
- Prepayment rate (if required)


TOOL STRUCTURE

The template contains, 6 tabs split into input ('i_'), calculation ('c_'), output ('o_’) and system tabs. The only tab to be populated by the user is the input tab ('i_Assumptions'). The calculation tab uses the user-defined inputs to calculate and produce the template outputs presented in 'o_Results'.
.System tabs include the following:
- 'Front Sheet' containing a disclaimer, instructions and contents;
- Checks dashboard containing a summary of checks by tab.


OTHER KEY FEATURES

Other key features of this tool include the following:
- The tool follows best practice financial modelling guidelines and includes instructions, line item explanations, checks and input validations;
- The tool can calculate fair values for debt facility / loans with a maximum maturity of 20 years from valuation date;
- The template can calculate fair value for a Bullet-type debt / loan (all principal is paid on maturity date) or an amortising debt / loan (principal is paid as part of the periodic instalments across the life of the loan);
- The template calculates interest and loan balance on a daily basis for a maximum of 20 years (+7,300 rows);
- The daily interest rates are derived from the yield curve points using linear interpolation;
- Loan/Debt name, currency, valuation date, etc. are customisable;
- The tool includes a checks dashboard which summarises all the checks included in the various tabs making it easier to identify any errors;
- The tool includes checks and input validations to help ensure input fields are populated accurately.


MODIFICATIONS

If you require any be-spoke modifications to the tool, we are more than happy to assist with this. Please send us a message through the Eloquens site or contact us on: hello@useprojectify.com


ABOUT PROJECTIFY

We are a small team of financial modelling professionals with experience working in Big 4 Business Modelling teams and strong experience supporting businesses with their financial planning and decision support needs. Our aim is to provide robust and easy-to-use tools that follow best practice financial modelling guidelines and assist individuals and businesses with common financial planning and analysis processes.

We are keen to make sure our customers are fully satisfied with the tools / models they purchase and will be more than happy to assist with any questions or support required following or in advance of purchase. We are also always keen to receive feedback so please do let us know what you think of our products/offering by sending us a message or submitting a review.

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Further information

Calculation of Debt facility / loan market fair value


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