Partnerships & waterfalls

Operating, refinance & exit distributions

What cash is available at each distribution event?

Overview · What & why

A decision, before a calculation.

Cash can reach partners through operations, refinancing or sale. Each event has a different source and may trigger different agreement provisions. Refinancing can return capital while the asset remains owned, but it also creates a debt obligation. A distribution should follow a cash-availability test before it follows a waterfall.

A concrete example

A refinance raises $8M, repays $7M and incurs $100K of costs. Only $900K remains before reserves. Distributing the full $8M would ignore the existing obligation and substantially overstate partner receipts.

What to remember

Establish distributable cash before allocating it.

Before using this in a project: Event statement, payoff quote, reserve requirements, transaction costs and the distribution agreement.