Interest coverage test

Interest coverage test

A debt limitation that prohibits the issuance of additional long-term debt if the issuer's interest coverage would, as a result of the issue, fall below some specified minimum.

Interest Coverage Test

A rule that some companies have forbidding them from issuing more long-term debt securities if doing so would drive their interest coverage ratio below some, defined ratio. See also: Debt limitation.
References in periodicals archive ?
For the purpose of the interest coverage test, zero-coupon securities are excluded from the calculation of interest coverage because the security is not generating a predictable stream of interest in cash.
The entity fails a debt-equity or interest coverage test.
With the class C interest coverage test currently passing and the class C overcollateralization test recorded at 102.
Per its bylaws, Gener is prohibited from upstreaming cash to AES, via an intermediate holding company, if it fails to meet an interest coverage test.
Subordinate Notes will continue to be restricted from residual cash flows until the second priority interest coverage test is elevated to a passing level.
In addition to the failure of A-2 OC coverage test, class A-1 interest coverage test is currently below the required trigger amount and has been doing so since August 2005.
The ratings change also causes certain covenants in the $380 million of five-year notes issued in November 2002 to become operative, including EBITDA to interest coverage tests.
This rating action reflects the decline in collateral credit quality, defaults, and collateral sales executed at highly distressed prices, which have resulted in the deterioration of the transaction's principal and interest coverage tests.
Prospectively, CSP will need to improve earnings to restore its ability to issue first mortgage bonds on the basis of indenture interest coverage tests.
All Overcollateralization and Interest Coverage tests are failing the covenants.
The notes pay principal in sequential order and there are no over-collateralization or interest coverage tests.
In addition, the deal continues to pass all overcollateralization and interest coverage tests and continues to benefit from stable credit enhancement.