Debt-service coverage ratio

(redirected from Debt-Coverage Ratio)

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 ?
Going forward, we expect the Group to maintain an FFO debt-coverage ratio of above 0.
They will discover that when debt expires in a rising interest-rate environment, their debt-coverage ratio may no longer meet lender standards.
Despite lower crude palm oil (CPO) prices in FY Dec 2013, LKPP reported a net-cash position while its operating cashflow debt-coverage ratio came in very strong at 0.
05x debt-coverage ratio (DCR), set by Freddie Mac at rate-lock.
Massachusetts Electric's adjusted interest and debt-coverage ratios are indicative of the favorable cost power purchase arrangements the company has with affiliate, New England Power Company.
As a result of this transaction, parent company debt will be reduced, resulting in materially improved debt-coverage ratios and decreased dividend requirements at the operating company level.
The combination of the currency mismatch between its dollar-denominated debt and its real-based revenues and the slowdown in cash flow generation resulting from a worsened economic environment brought debt-coverage ratios down to the lowest level in the company's rating history.
Loan-to-value (LTV) ratios have shrunk, and debt-coverage ratios have expanded, resulting in an increase in the amount of equity required to fund a transaction and an increase in the weighted average cost of capital.
To this point, major new hotel projects in New York, despite the improving economics, still have difficulty attaining the loan-to-value and debt-coverage ratios to meet investment banking criteria.
While no lender likes to see debt-coverage ratios drop, they should be reassured that most stable full-service hotels will still be able to generate enough cash flow to pay their mortgages," Woodworth said.