medium · Private Credit underwriting-credit-analysis
Which of the following best describes the structural difference between the Interest Coverage Ratio (ICR) and the Fixed Charge Coverage Ratio (FCCR)?
- FCCR deducts capital expenditures and taxes from EBITDA in the numerator and includes scheduled principal in the denominator.
- ICR includes scheduled principal repayments in the denominator, while FCCR considers only cash interest expense owed.
- The FCCR denominator only includes discretionary dividends and management fees paid to sponsors and affiliated parties, unlike the ICR.
- ICR is used exclusively for senior secured term loan tranches, while FCCR is used only for subordinated mezzanine debt facilities.
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