medium · Private Equity advanced-lbo
When calculating Interest Coverage (Adjusted EBITDA / Interest Expense) for a debt covenant, how is OID amortization usually treated?
- It is added back into EBITDA a second time, rather than netted against Interest Expense
- It is typically excluded, as covenants often focus on 'Cash Interest Expense'.
- It is always included in the ratio, making the covenant more restrictive
- It is used to directly reduce the numerator of the coverage ratio
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