Debt-service coverage ratio

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Debt-service coverage ratio

Earnings before interest and income taxes, divided by interest expense plus the quantity of principal repayments divided by one minus the tax rate.

Debt-Service Coverage Ratio

1. In investment real estate, the ratio of annual net operating income on a piece of investment property to its annual debt service. Banks use the DSCR to help determine whether to make or refinance loans for investment property. A DSCR equal to or greater than 1 indicates that the debtor is able to service the debt on the income from the investment property. In personal finance, banks usually require a DSCR of at least 1 to make such a loan, while they generally expect a ratio of 1.2 for commercial projects.

2. In government finance, the ratio of annual export earnings to its annual debt service on external debt.
References in periodicals archive ?
Third, the transaction has conservative loan to value and debt service coverage ratios that will provide protection to the noteholders of timely payment of interest and principal commensurate with the assigned rating level.
The indenture limits additional debt other than the currently outstanding notes to debt for working capital up to $20 million, and debt for capital expenditures and/or subordinated debt providing that the projected debt service coverage ratio (DSCR) exceeds 1.
The company's debt service coverage ratios are supported by positive leasing spreads that have been in the double digits on a percentage basis across the portfolio over the past several years.
Also, these noncrossed deals, which may have debt service coverage ratios that vary significantly from one loan to the next, need to be analyzed on a loan-by-loan basis.
Debt service coverage ratios have been consistently solid with interest and fixed charge coverage measuring 2.
While the CRP acquisition adds a large pool of high quality senior housing and medical office assets to HCP's existing, diversified portfolio and increases the company's exposure to private pay sources of revenue, Fitch is very concerned by the significant increase in leverage and related erosion in debt service coverage ratios resulting from the acquisition.
Fitch also notes that HCN has indicated that it intends to maintain debt service coverage ratios and leverage within existing ranges after the closing of the acquisition.
Though the company's leverage will likely increase and its debt service coverage ratios (DSCR) may decrease somewhat, Fitch expects the company to finance the acquisition in a manner that is appropriate for the existing ratings.
NHP maintains solid debt service coverage ratios, a sizable pool of unencumbered assets, well-laddered debt maturities and minimal lease expirations over the next several years.