medium · Investment Banking rx-dcm-ecm
A lender provides a $100.0M Term Loan with a maintenance covenant requiring a maximum Total Debt / EBITDA of 5.0x.
If the company's EBITDA drops to $18.0M, is the company in compliance if the Term Loan is its only debt?
- Yes, because the company still generates positive EBITDA.
- No, because EBITDA must be at least $25.0M.
- Yes, because the ratio is 4.5x.
- No, because the ratio is 5.56x.
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