Private Credit Covenant Cushion Calculator
Quantify how much EBITDA erosion and incremental debt your facility can absorb before violating a leverage covenant. Enter net senior debt and covenant EBITDA to reveal current leverage, dollars of cushion, the EBITDA decline tolerated before a breach, and any paydown required to maintain your desired headroom.
For monitoring purposes only. Always reconcile calculations with your credit agreement and lender notices.
Examples
- $180,000,000 debt, $55,000,000 EBITDA, 4.0x covenant, 15% headroom ⇒ Current leverage: 3.27x • Covenant allowance: $220,000,000.00 USD • Headroom vs. covenant: $40,000,000.00 USD • EBITDA drop tolerated before breach: $10,000,000.00 USD (18.18%) • Headroom target of 15.00% already met
- $95,000,000 debt, $18,500,000 EBITDA, 3.5x covenant, 20% headroom ⇒ Current leverage: 5.14x • Covenant allowance: $64,750,000.00 USD • Shortfall vs. covenant: $30,250,000.00 USD • EBITDA drop tolerated before breach: $0.00 USD (0.00%) • Debt paydown to hit 20.00% headroom: $43,200,000.00 USD
FAQ
Can I use adjusted EBITDA instead of GAAP?
Yes. Enter the EBITDA figure specified in your covenant calculations, including any sponsor or lender-approved adjustments.
How should I treat mezzanine or preferred debt?
Include only the tranches captured by the specific leverage covenant being tested. Senior secured covenants usually ignore mezzanine pieces, while total leverage covenants include them.
What if my covenant steps down over time?
Run the calculation with each future step-down multiple to see when headroom disappears and plan deleveraging moves before the tighter threshold applies.
Additional Information
- Net debt subtracts unrestricted cash that can be legally swept; exclude trapped cash or restricted accounts.
- Leverage covenants are typically measured quarterly using trailing twelve-month EBITDA defined in the credit agreement.
- Headroom targets help lenders and sponsors size proactive paydowns or add-on availability before refinancing.