hard · Private Credit underwriting-credit-analysis
A borrower is in compliance with its 5.0× leverage covenant but its 'DSCR' is 0.95×.
What does this indicate to a credit analyst?
- The company is highly profitable but dangerously over-leveraged versus peers
- The company is not generating enough cash flow to meet its current debt obligations
- The company currently has significant liquidity headroom and ample covenant cushion left
- The company is in technical default on its 5.0x leverage covenant under the credit agreement terms.
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