
Ultimate Guide to DSCR in LBOs
Debt Service Coverage Ratio (DSCR) is a key metric in leveraged buyouts (LBOs), measuring a company’s ability to cover its debt payments using operational cash flow. It’s calculated by dividing adjusted EBITDA by total debt service, with most lenders requiring a minimum of 1.25x—though 2.0x is preferred. Strong DSCR not only secures better loan terms but also ensures post-acquisition stability, making it essential for structuring, stress-testing, and managing LBO debt effectively.