Difference between DSCR, LLCR and PLCR

Difference between DSCR, LLCR and PLCR

DSCR (Debt service coverage ratio) measures the ability  to pay the debt in any particular year. A debt service ratio of 1.3 means that for a total debt and interest obligation of $ 100 the free cash flow available to service the same is $ 130. The higher ratio gives more comfort to the lenders and it becomes easier to obtain a loan. A DSCR of less than 1 would mean a negative cash flow. A DSCR of less than 1, say .95, would mean that there is only enough net operating income to cover 95% of annual debt payments. For example, in the context of personal finance, this would mean that the borrower would have to delve into his or her personal funds every month to keep the project afloat.

DSCR = [CFADS over Loan Life] / [Debt Balance b/f + Interest repayment]

DSCR = (Annual Net Income + Amortization/Depreciation + Interest Expense + other non-cash and discretionary items (such as non-contractual management bonuses)) / (Principal Repayment + Interest payments + Lease payments)

Loan life coverage ratio measures the ability of the borrower to repay an outstanding loan. The Loan Life Coverage Ratio (LLCR) is calculated by dividing the net present value (NPV) of the money available for debt repayment in the loan repayment period by the amount of senior debt owed by the company.

LLCR = NPV [CFADS over Loan Life] / Debt Balance b/f

The PLCR is similar to the LLCR – it is the ratio of the net present value (NPV) of the cash flow over the remaining full life of the project to the outstanding debt balance in the period.

LLCR = NPV [CFADS over Project Life] / Debt Balance b/f