medium · Private Equity
An LBO candidate generates $80M in EBITDA. A lender offers a maximum leverage of 5.0× EBITDA, but a maintenance covenant requires a minimum Interest Coverage Ratio of 2.0×.
If the blended interest rate is 8%, which constraint is more restrictive for the initial debt capacity?
- Leverage Multiple
- Neither, the DSCR is always the primary driver
- Both are equally restrictive
- Interest Coverage Ratio
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