Interest coverage with rolled interests
Hi,
when you calculate the Interest coverage Ratio using EBITDA / Interest Expense, how do you account for non-cash interests (rolled interest from mezzanine, junior sub or PIK) ? Do you consider that this is non cash and therefore should not include din your interest expense ? Or do you add it to the cash expense ?
Thanks,
Antoine
no you don't... as EBITDA for this ratio is being used as a metric for CF, you want to see if it has enough cushion to cover the cash portion of the interest expense...
Europe uses a better ratio for this IMO, FCF / Debt Service (Madatory Repayments + Cash Interest)...
non cash interest is not included in interest coverage calcs
Great, thanks for your answers
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