Liquidity and Covenant Quick Reference
Recall the key liquidity, covenant, and refinancing checks for a levered investment.
Core recall What is the first liquidity question? What cash sources are available before each hard obligation date? Use a calendar: cash, revolver availability, free cash flow, asset sales, and refinancing versus maturities, interest, capex, and covenants. Do not confuse these EBITDA coverage versus free-cash-flow coverage A credit can look fine on EBITDA and still run out of cash. Management claim Management says liquidity is adequate. Maturity wall is 14 months away and covenant headroom is shrinking. Your line Adequate through which date, under what EBITDA case, and before or after the next covenant test? Accepting liquidity adjectives without dates…
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