LBO Covenant Headroom Workbench
Apply one agreement-defined numerator, denominator, limit schedule, and test direction across reporting periods without importing a generic covenant definition or “normal” headroom threshold.
Separate ratio arithmetic from agreement interpretation
Capture the controlling section, define the numerator and denominator, and mark whether each test is active before reading headroom.
The worksheet does not determine EBITDA add-backs, debt netting, baskets, testing dates, springing conditions, cure rights, amendment consequences, or lender remedies. Those are agreement and legal questions.
Swipe horizontally to edit every column
| Period | Test active? | Numerator | Denominator | Contractual limit | Actual | Headroom | Status | |
|---|---|---|---|---|---|---|---|---|
| 4.50x | +0.50x | Pass | ||||||
| 4.89x | -0.14x | Breach | ||||||
| — | — | Not tested |
Enter numerator and denominator amounts only after applying the definitions, add-backs, caps, netting, testing dates, and baskets in the controlling credit agreement. “Active” is user-entered so the worksheet does not guess whether a springing test applies. A positive headroom number means passing for both maximum and minimum tests. Any cure or amendment must be modeled by entering the agreement-permitted adjusted values; the worksheet does not assume how new money changes a covenant.
The worksheet runs in your browser. Use synthetic or de-identified inputs; do not paste confidential deal, fund, employee, or lender information.
Headroom convention
For a maximum test, headroom equals the limit minus the actual ratio. For a minimum test, it equals the actual ratio minus the limit. Positive means passing, zero means exactly at the limit, and negative means a numerical breach under the entered values. An optional warning buffer is your own internal policy input; the tool provides no default.
Evidence Atlas EA-04B explains why current bank surveys do not establish one sponsor-loan covenant package or covenant-lite prevalence. The executed credit agreement remains controlling.
This educational worksheet is not legal advice, a compliance determination, or a substitute for the current credit agreement and lender calculations.