Say there is a company (company A) with 5x leverage and 8x EV.
Say company B has 5x leverage and 15x EV.
Why is company A more risk to lend to? As ultimately they have the same leverage multiple
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15x EV/EBITDA is a larger company / more valuable, probably safer investment. It’s valued at a higher multiple so you can infer a number of qualities about it that make it more attractive.
The company that I think is less risky to lend to is the 15x EV company because the LHS of the balance sheet is stronger (relative to the 8x EV company). Assuming there is no cash in either company, for the smaller one the equity is 3x EBITDA and for the larger one the equity is 10x EBITDA. If the LHS side of the balance sheet (assets) is stronger, this gives more assurance to lenders in the case that the cash flows (EBITDA as a proxy) cannot service the debt, they can always take the value that would have gone to equity holders.
You could also argue that while the relative leverage to EBITDA is the same, the quality of EBITDA is different and you should look at operational (i.e. sustainable/recurring) cash flows - minus mandatory/maintenance CAPEX instead to determine the true ability of the company to service the debt. Especially if one company may require maintenance CAPEX equivalent to D&A while the other requires none at all.
To the guy above, the 15x company is not necessarily bigger than the 8x company since they could have different EBITDAs. For example 8(100) = 800 while 15(20) = 300. So there's no reason to believe that 15x is more of a "going concern"/reliable/established than 8x just because the multiple is higher. It's all about relative risk.
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