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 ?
Wells Fargo Securities said debt-service coverage ratios improved modestly last year to 1.78x from 1.76x in 2014, "but the improvement came in a year that saw the average loan coupon decline 28 basis points," the report said.
The "stable" outlook incorporates the district's good debt-service coverage due to consistent assessed valuation (AV) growth and ability to raise the mill levy, the rater added.
Traditional fixed-rate mortgages have encountered decreases in debt-service coverage ratios (DSCR) and increases in loan to value (LTV), and the borrower's economic incentive for loan repayment has changed for the worst.
Lenders have generally loosened debt-service coverage and loan-to-value (LTV) ratio requirements to achieve higher yields amid heavy lending competition, Fitch said.
The study also indicates that spreads are tightening on comparably rated issues; the average transaction size is increasing; the number of AAA-rated tranches is up sharply; and debt-service coverage and loan-to-value ratios have remained at conservative levels.
Debt-service coverage started 2013 with a healthy three-month rolling average of 1.80x, which trended upward during the first quarter, Kroll reported.
DealCentral technology captures the data from servicers at the point of issuance and continuously updates that data, focusing on a number of data points important to CMBS investors, including cash-flow statements and debt-service coverage numbers.