Signal Lab

Covenant & DSCR Headroom

A covenant headroom model for leverage, interest cover, and DSCR.
It measures distance to thresholds in turns and dollars, with EBITDA and rate stress.
Use it to see how much EBITDA room you have before a covenant conversation.

Balance Sheet Risk What-ifs

Signal Lab · Model

Covenant & DSCR Headroom

Leverage, interest cover, and DSCR (debt service coverage ratio) vs editable thresholds — headroom in turns and dollars, then stress EBITDA and rates.

Illustrative AU sample until you enter actuals. Not financial advice. Lender definitions vary.

Facility inputs and covenant thresholds

Edit definitions — add-backs and cash vs accounting vary by lender. Persist locally · Jump to headroom

Interest + scheduled principal.

Used to scale interest under +bps stress.

Covenant thresholds (editable)

Ratios, headroom, and traffic lights

Inside / tight (<15% relative headroom) / breach vs your thresholds.

Equations

  • Leverage = Net Debt ÷ EBITDA · headroom turns = Max − actual · headroom $ = (Max × EBITDA) − Net Debt
  • Interest cover = EBITDA ÷ Interest · headroom turns = actual − Min
  • DSCR (debt service coverage ratio) = EBITDA ÷ Debt service · headroom turns = actual − Min · headroom $ EBITDA = EBITDA − (Min × Debt service)
  • Tight = inside covenant but relative headroom < 15% of the threshold distance

How this is calculated
  • Leverage = Net Debt ÷ EBITDA (lower is better vs a max threshold)
  • Interest cover = EBITDA ÷ Interest
  • DSCR = EBITDA ÷ Debt service (interest + scheduled principal)
  • Leverage headroom $ = capacity before breach = (threshold × EBITDA) − Net Debt
  • DSCR headroom $ = EBITDA − (min DSCR × Debt service)
  • Stress: EBITDA × (1 + shock%/100); rate stress scales Interest and the interest portion of debt service by (stressed rate ÷ current rate)

Illustrative — lender definitions vary. Not financial advice.

Stress panel

EBITDA shock and rate +bps — live stressed ratios and lights.

What-if stress

Principal = max(0, Debt service − Interest). Rate bps uses your current interest rate %.

0 to −40%. Scales EBITDA only.

Stressed rate = current % + bps/100. Scales Interest and interest-part of debt service.

Take it with you

Download a prompt, export the Excel workbook, or email yourself.

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