medium · Corporate Credit Analysis
A cyclical issuer's peak EBITDA is $500 million, but its troughEBITDAis only $200 million.
If the issuer carries $1,200 million in debt, how would a through-the-cycle rating approach evaluate its leverage?
- The rating would anchor on a mid-cycle EBITDA of approximately $350 million, resulting in 3.4x leverage.
- The rating would ignore EBITDA and use the Debt / Capital ratio instead.
- The rating would be based on the trough 6.0x leverage to ensure conservatism.
- The rating would be based on the peak 2.4x leverage but with a negative outlook.
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