Interest Risk and Deal Analysis

[Daniel Lozowy]

What’s a conservative assumption for interest risk. If you count on re-fi in 1 year how much should you add to the current interest rates In your model?

[Brian Briscoe]

Do you have a plan B?  Does the deal hinge on a refinance at year 1? If so, I'd underwrite it with a range of interest rates and see where the deal breaks.  

I definitely appreciate posts from @Ryan Daigle and @Eric Johnson... very insightful and about as analyitic as you can get.  If the deal works at current rate + 100bps, you're probably safe... but see if it works at 150 or 200bps.  The higher you can go, the safer you are...

No matter what you use, I'd make sure I had flexibility built into my short-term financing.  That's just me though.