Fixed Charge Coverage Ratio (FCCR)
Definition
The fixed charge coverage ratio broadens interest coverage to test whether earnings cover all fixed obligations — a common formulation is (EBITDA − capex, or EBITDA − maintenance capex − cash taxes) ÷ (cash interest + scheduled principal amortization + rent/lease payments), though definitions are heavily negotiated and vary by document.
FCCR appears in two main places: as the springing maintenance covenant in asset-based lending (ABL) facilities — commonly a minimum of 1.0x tested when availability falls below a threshold — and as the ratio test (commonly 2.0x) governing debt incurrence in high-yield indentures.
Because it captures amortization, capex, and leases, FCCR is a stricter, more cash-realistic test than simple EBITDA/interest, especially for capital-intensive or lease-heavy businesses like retailers.
Why interviewers ask
FCCR is a detail that separates candidates with genuine credit exposure from those with memorized formulas. Interviewers in leveraged finance, restructuring, and private credit may ask what covenant an ABL springs on, or which ratio gates debt incurrence in a high-yield indenture.
Related terms
Interviews don't test definitions — they test recall under pressure.
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