hard · Corporate Credit Analysis credit-metrics
NorthStar Industries has current LTM EBITDA of $240M and net debt of $900M. It is subject to a maximum net leverage covenant of 5.50x. The analyst assumes a cash-flow feedback loop where 75% of every dollar of EBITDA lost results in a dollar of additional revolver draws (cash conversion efficiency of 75%).
At what approximate percentage decline in EBITDA will the firm breach its covenant?
- 38.2%
- 31.8%
- 18.5%
- 25.6%
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