Covenants: Fixed Charge Coverage Ratio & Debt Service Coverage Ratio
How are FCCR & DSCR calculated and what is the language usually like in a non-covlite scenario.
The formulas I have seen are below. Are these correct? Also, for DSCR, how are revolver draw/(repayments), Pik non-cash interest, and optional prepayments considered in calculating the ratio. These ratios seem to be quite similar, so what is the conceptual difference between the two?
FCCR: (EBITDA - CapEx - Mgmnt Fee - Taxes) / (Cash Interest Expense + Mandatory Amort)
DSCR: (EBITDA - CapEx) / (Cash Interest + Mandatory Amort + Principal Repayments)
I have never dealt with a FCCR/DSCR maintenance covenant, so I am wondering what covenant language is usually like in a levered transaction that includes these.