medium · Corporate Credit Analysis ratings
A $500 million TLB is issued with 98.0 OID. For the purpose of computing Funds From Operations (FFO) and leverage ratios, how do rating agencies and credit analysts typically treat the10 million discount?
- It is ignored in FFO and debt totals alike, treated purely as a non-cash bookkeeping item
- As a one-time financing cost that reduces reported EBITDA in the issuance year
- Only $490 million is counted as debt outstanding, with no offsetting interest adjustment made
- The full $500 million is treated as debt, and the OID is amortized as non-cash interest expense
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