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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
Going forward, we expect the Group to maintain an FFO debt-coverage ratio of above 0.3 times, under RAM's stressed scenario.
"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 0.98 times.
Furthermore, certain borrowers may close the loan before property stabilization, at a minimum occupancy of 65 percent and net operating income level equivalent to a 1.05x debt-coverage ratio (DCR), set by Freddie Mac at rate-lock.
Fitch forecasts that over the medium term Rzeszow's debt-service and debt-coverage ratios will remain adequate for the ratings.
"The affirmations are based on the cash flows generated from the eight Singapore retail properties which comprise the underlying security for the notes, as well as from high debt-coverage ratios and the strong occupancy levels of the properties," Fitch explained.
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.
Fitch forecasts that the debt-service and debt-coverage ratios will remain adequate for the rating.