Heavy Debts pic had an agreed debt service coverage ratio, DSCR, of 1.25, where DSCFt = monthly

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Heavy Debts pic had an agreed debt service coverage ratio, DSCR, of 1.25, where DSCFt = monthly net operating income/monthly principal and interest on loan. In 2013 the company's DSCR had fallen to 1.02 which was above breakeven but lower than the agreed rate. The Board believes that it is likely that a covenant default would have a material adverse impact on the value of the underlying businesses. Discuss three possible ways in which the company could deal with this in order to avoid a breach of the covenant.

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Financial Accounting And Reporting

ISBN: 9780273778172

16th Edition

Authors: Mr Barry Elliott, Jamie Elliott

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