easy · Private Credit underwriting-credit-analysis
Why is 'Maintenance Capex' often subtracted from EBITDA in the FCCR calculation?
- Because interest payments are tax-deductible expenses while capex outlays receive no comparable deduction treatment.
- Because maintenance capex is a necessary cash outflow to keep the business running and is not available for debt service.
- To increase the reported EBITDA figure, which makes the company appear more profitable to prospective senior lenders.
- To encourage the company to sell off its aging machinery and equipment rather than reinvesting cash into ongoing operations.
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