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LexisNexis Practical Guidance®
Straightforward guidance across a range of topics
- Acquisition finance
- Financing the acquisition
Financial covenants in acquisition finance
The financial covenants contained in a leveraged finance facility agreement commonly include:
- • finance debt or senior debt to EBITDA ratio (leverage/senior leverage covenant);
- • CFADS (cashflow available for debt service to debt service ratio (debt service cover covenant or ”DSCR”);
- • EBITDA to interest/senior interest ratio (interest cover ratio ”ICR”); and
- • limit on capital expenditure.
This guidance note describes these financial covenants and outlines the consequences of breach including the sponsor’s typical equity cure rights.
See Financial covenants in acquisition finance.
