Calculate covenant headroom and identify the first forecast breach

Make the test definition reproducible

All monetary amounts below are EURk: 1 EURk = EUR 1,000. Native model files store base-currency EUR; choose EUR and the thousands display unit to reproduce these tables. All businesses, balances and financing terms are synthetic.

Gross debt stays at 200. EBITDA is 100, 80 and 60 across 2026–2028. Annual interest is 20, generated by a 10% loan rate. The tests are Debt / EBITDA ≤ 3.0× and EBITDA / Interest ≥ 3.0×, effective from 1 January 2026 through 31 December 2028, with annual testing on 31 December.

Download the native covenant schedule. The source is Reported and earnings use trailing twelve months. Investment equals EBITDA less interest, so cash stays at 20. No negotiated add-backs or custom contractual EBITDA adjustments are assumed.

Use the correct direction for headroom

For a maximum test, headroom = threshold − actual. Leverage of 2.0× against 3.0× leaves +1.0×. At 3.333× it leaves −0.333× and breaches. For a minimum test, headroom = actual − threshold. Coverage of 5.0× against 3.0× leaves +2.0×; coverage of 3.0× leaves zero.

The first failing scheduled leverage test is 2028-12-31. Coverage reaches the boundary that day but does not fail the inclusive ≥ test. Zero headroom means at the limit, not unused safety margin. The UI may mark a small positive margin as tight; that is distinct from a failed threshold.

Check dates as well as the number

1. Open Debt Capacity & Covenants and inspect the two annual rules, including their effective start and end dates.
2. Confirm the metric’s source basis and denominator. Compare each actual ratio with its own threshold and operator.
3. Read the signed headroom and first-breach date. Switch display resolution only to inspect the schedule, not to redefine the covenant frequency.
4. Use Inspector to trace the selected test. Review any N/M reason before concluding that a rule passed.

Unavailable is not passed

Nonpositive EBITDA makes these earnings-based ratios N/M in the native model. Zero interest also makes coverage N/M; the engine does not call it an infinite observed ratio. Incomplete trailing history can make an otherwise valid early period unavailable. The result is an explicit inability to evaluate the test, not proof of compliance.

A ratio-point margin is not a cash amount. The percentage headroom uses the absolute threshold as denominator; with a zero threshold that percentage is unavailable. Comparing different rules requires their definitions, rather than simply selecting the largest displayed percentage.

Separate a covenant test from a capacity decision

A covenant is tested on the modeled debt and results at its scheduled date. Debt capacity instead asks how much debt chosen constraints would support. A supported covenant may also be selected for capacity, but that is an explicit choice.

This example does not interpret legal terms, negotiate add-backs, predict a waiver or establish a universally safe threshold. The test and headroom reference and metric definitions provide the implementation detail.