Definitions:

Total Net Leverage is typically calculated as:

$\text{Total Net Leverage} = \frac{\text{Gross Total Debt} - \text{Cash \& Equivalents}}{\text{EBITDA}}$

• Gross Total Debt: $500m
• Cash & Equivalents: $50m
• EBITDA: $100m
• EBITDA Margin: 20% (though not directly used, this can help interpret changes in EBITDA).

Let's calculate how each of the four proposed changes would impact Total Net Leverage:

---

1. An increase in Gross Senior Debt of $75m

• New Gross Total Debt = $500m + $75m = $575m
• Cash remains unchanged at $50m
• EBITDA remains unchanged at $100m

$\text{New Net Leverage} = \frac{575m - 50m}{100m} = \frac{525m}{100m} = 5.25$

The original Net Leverage is:

$\text{Original Net Leverage} = \frac{500m - 50m}{100m} = \frac{450m}{100m} = 4.5$

Change in Net Leverage: 5.25 - 4.5 = +0.75

---

2. A decrease in Cash of $50m

• Gross Total Debt remains $500m
• New Cash & Equivalents = $50m - $50m = $0
• EBITDA remains $100m

$\text{New Net Leverage} = \frac{500m - 0m}{100m} = \frac{500m}{100m} = 5.0$

Change in Net Leverage: 5.0 - 4.5 = +0.5

---

3. A decrease in EBITDA of $10m

• Gross Total Debt remains $500m
• Cash remains $50m
• New EBITDA = $100m - $10m = $90m

$\text{New Net Leverage} = \frac{500m - 50m}{90m} = \frac{450m}{90m} = 5.0$

Change in Net Leverage: 5.0 - 4.5 = +0.5

---

4. A decrease in EBITDA margin of 5 percentage points

• The EBITDA margin decreases from 20% to 15%, but the question does not directly provide a revenue figure. To interpret this, assume that the revenue remains unchanged and focus on the relative decrease in EBITDA.
• Assumption: EBITDA margin decreases by 5%, which is a proportional decrease in EBITDA.

$\text{New EBITDA} = 100m \times \left(\frac{15}{20}\right) = 75m$

• Gross Total Debt remains $500m
• Cash remains $50m

$\text{New Net Leverage} = \frac{500m - 50m}{75m} = \frac{450m}{75m} = 6.0$

Change in Net Leverage: 6.0 - 4.5 = +1.5

---

Conclusion:

The largest increase in Total Net Leverage occurs with the decrease in EBITDA margin by 5 percentage points, which increases Net Leverage by +1.5.

Would you like more details or have any questions?

---

5 Related Questions:

1. How does an increase in Gross Senior Debt affect the balance sheet ratios?
2. What are the implications of decreasing EBITDA for debt servicing?
3. How is EBITDA margin connected to overall profitability metrics?
4. What other financial ratios are impacted by changes in cash levels?
5. How would issuing new equity impact leverage?

Tip: Always monitor both debt and EBITDA changes in tandem, as leverage is sensitive to shifts in both.