Balance Sheet Capacity - Debt Repayment
Ratio 47. Net Debt/EBITDA
(times)
Total debt less cash and short-term investments divided by surplus before
interest, tax, depreciation, amortisation, impairment and any other non-cash
adjustments: The ratio to debt to "cash operating profit." EBITDA
(or SBITDA) here is taken from the Cash Flow Statement and is defined
quite widely to incorporate all non-cash adjustments.
A very popular 'debt multiple' for assessing broad affordability, but
not a direct measure of 'years to repay debt.' The maximum for commercial
property companies might be 10 times. Because of the low depreciation
and tax of RSLs a maximum of 12.5 or even 15.0 might be acceptable to
lenders.
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Ratio 48. Net Debt/Cash
Flow after Interest, before Capex (years)
Net debt divided by the cash flow (before capex) available for debt repayments.
A cash flow debt multiple. If this ratio is less than the RSL's average
term of debt, (maximum, say, 40 years) then the RSL could repay its existing
debt out of cash flow, provided it carried out no further capex or new
developments were 100% grant plus debt financed. But if the ratio indicates
that it could repay then it will probably not have to! For RSLs 30 or
less would generally be comfortable.
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