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 ?
It will rank on par with Walt Disney's existing debt, be subject to an interest coverage test of 3x and contain no ongoing material adverse change clause, the agency noted.
Two types of covenants are examined for historical performance purposes: the Overcollateralization Test and the Interest Coverage Test.
The Interest Coverage Test is also crucial, as it examines a portfolio's ability to pay each tranche (interest income from portfolio/interest payments to a given tranche).
The entity fails a debt-equity or interest coverage test.
* 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.
For the purpose of the interest coverage test, the interest due on PIK securities is excluded from the interest coverage test once a payment of interest has been deferred.
There is incremental capacity for secured debt under MGP's bond covenants per a $2.9 billion secured credit facility carveout ($2.8 billion outstanding today due to recently closed acquisition) and a 45% of adjusted total assets carveout (roughly $7 billion estimated, but subject to 2.0x interest coverage test).
The rating reflects initial credit enhancement levels, excess spread, four levels of coverage tests including overcollateralization ratio and interest coverage tests, and an interest diversion test.
Fitch used a customised proprietary cash flow model to replicate the principal and interest waterfalls and the various structural features of the transaction, and to assess their effectiveness, including the structural protection provided by excess spread diverted through the par value and interest coverage tests.
The ratings reflect initial credit enhancement levels, five levels of coverage tests including par value and interest coverage tests, excess spread, and a reinvestment overcollateralisation test.
Fitch used a customised proprietary cash flow model to replicate the principal and interest waterfalls and the various structural features of the transaction, and to assess their effectiveness, including the structural protection provided by excess spread diverted through the par value and interest coverage tests. The modelled waterfall has been standardised so that both interest and deferred interest for a given class are paid prior to the corresponding coverage test.
Fitch used a customised proprietary cash flow model to replicate the principal and interest waterfalls and the various structural features of the transaction and to assess their effectiveness, including the structural protection provided by excess spread diverted through the par value and interest coverage tests.