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 ?
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.
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.