How far earnings can fall before a covenant breaks calculator

How far earnings can fall before a covenant breaks, worked through in your browser.

Interactive: how far earnings can fall before a covenant breaksMedium

Headroom is not a number a lender publishes. It is how much of this year's earnings can disappear before the first test fails, and it is usually smaller than the board thinks.

EBITDA ($m) Net debt ($m) Interest rate % Maximum leverage (×) Minimum interest cover (×)

Leverage now: —
Interest cover now: —
Earnings needed for the leverage test: —
Earnings needed for the cover test: —
Headroom: —
First to break: —
Reading: —

Covenants are tested on a defined EBITDA over a defined period, with add-backs the agreement lists. Every one of those definitions moves this number. Information and education only. Not advice, not a valuation, and not a quote for anything.

The idea behind it

This calculator belongs to Restructuring, where the mechanism it computes is explained step by step, with the formula, what each input means and where the simple model stops being right. Everything is computed in your browser; nothing you type is sent anywhere.

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The same in full — six points, and why each one matters

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