How do you calculate devt covenant cushion..

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Depends on the covenant you are testing

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Read the loan agreement

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Cushion would be the delta between the metric you’re calculating and the defined covenant ratio

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its almost always EBITDA and the cushion is actual EBITDA less the hurdle amount. For total leverage; E.g. $30mil debt, 3:1 total leverage requirement = 10mil EBITDA hurdle/minimum. If actual company EBITDA is $15mil, the cushion is $5mil.

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Ok so basically how much wiggle room they have before they fail the covenant

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Total leverage ratio

Usually total debt over EBITDA... I could be wrong but definitely read the debt agreement as they usually spell it out and some want it calculated a special way

Yeah that gives me the ratio but how do I get the cushion

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