medium · Debt Capital Markets credit-ratings-risk
A borrower has $500 million of EBITDA and $2.5 billion of debt. The portability threshold is 4.5x. A buyer wants to acquire the company and add $250 million of new debt to the balance sheet.
Can they use the portability exception?
- No, because the pro-forma leverage of 5.5x is above the 4.5x threshold.
- Yes, the existing debt stack remains comfortably below the 5.0x mark.
- Yes, because the EBITDA figure was never adjusted for cash interest.
- No, because adding any incremental new debt automatically triggers the 101% put offer.
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