Debt-service coverage ratio

(redirected from Debt Coverage Ratios)

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 ?
Ratings remain dependent on maintaining low gearing levels and sound debt coverage ratios given sizeable plans over the rating horizon.
Pro forma debt coverage ratios will be weaker than pre-disposal (both FFO interest coverage and EBITDA/interest expense will likely be just below 2x) but Algeco's debt service capacity is materially supported by the availability of unrestricted cash balances.
That could eventually weaken debt coverage ratios and cash flows for tax credit properties.
Under the NAIC methodology, individual mortgage ratings are based on debt coverage ratios, LTV and property type metrics.
Additionally, the company's new facility replaces its earlier USD15m secured revolving credit facility and contains some typical financial and other covenants and also, the company's ability to borrow under this facility is subject to compliance with the covenants and other restrictions on an ongoing basis, with the principle covenants limiting its level of debt and debt coverage ratios.
The closest company in terms of business scale and debt coverage ratios is TNK-BP, yet its credit quality looks even slightly worse due to occasional conflicts between key shareholders.
Lenders are back to industry norms in terms of loan-to-value and debt coverage ratios. The wild card is appraisals.
impact on SOCAR's leverage profile and debt coverage ratios. On a
If the region reinforces its debt coverage ratios and trim refinancing risk by extending its debt maturity profile, the agency may upgrade the ratings.
Thirdly, a company must pay holders of debt an interest rate, even if the company is loss-making--and failure to pay interest or to achieve debt coverage ratios may put the company into default and force a liquidation.
Cash debt coverage ratios of AM Corporation show that 27.4% of the total debts (current and long-term debts) could be covered in 2004 and 33.5% of the total debts in 2006, while in 2005 and 2007 the company did not appear to be able to pay any of its creditors using cash from operations alone.