Loan Life Coverage Ratio (LLCR) is a ratio commonly used in

project finance Project finance is the long-term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors. Usually, a project financing structure involves a number of eq ...

. The ratio is defined as:

Net Present Value The net present value (NPV) or net present worth (NPW) is a way of measuring the value of an asset that has cashflow by adding up the present value of all the future cash flows that asset will generate. The present value of a cash flow depends on ...

of Cashflow Available for Debt Service ("CFADS") / Outstanding Debt in the period. Financial modelling of LLCR is now a standard metric calculated in a project finance model and has been standardized to a large extentCrawley, Nick.
Financial modelling of LLCR
', September 2008 but always needs to be aligned with local practice of the financiers as described in the transaction term sheet. NPV(CFADS) is measured only up until the maturity of the debt tranche. The ratio is one of the aspects used for estimates of the credit quality of a project from a lender's perspective. Related ratios are: Project Life Coverage Ratio (PLCR) and Reserve Life Coverage Ratio (RLCR). The ratio usually is in a range from 1.25 for highly geared

infrastructure Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and pri ...

investment to 2.5 or higher in an investments with more insecure income, such as oil and gas transactions.

References

Loans {{finance-stub

See also

References