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Assigns"]], "parents": [["financial-covenants", "Financial Covenants"], ["negative-covenants", "NEGATIVE COVENANTS"], ["covenants", "COVENANTS"], ["affirmative-covenants", "AFFIRMATIVE COVENANTS"], ["miscellaneous", "Miscellaneous"]], "id": "interest-coverage-ratio", "related": [["minimum-interest-coverage-ratio", "Minimum Interest Coverage Ratio", "Minimum <strong>Interest Coverage Ratio</strong>"], ["consolidated-interest-coverage-ratio", "Consolidated Interest Coverage Ratio", "Consolidated <strong>Interest Coverage Ratio</strong>"], ["cash-flow-coverage-ratio", "Cash Flow Coverage Ratio", "Cash Flow Coverage Ratio"], ["minimum-consolidated-interest-coverage-ratio", "Minimum Consolidated Interest Coverage Ratio", "Minimum Consolidated <strong>Interest Coverage Ratio</strong>"], ["coverage-ratio", "Coverage Ratio", "Coverage Ratio"]], "related_snippets": [], "updated": "2026-07-10T04:32:05+00:00", "also_ask": ["What negotiation levers exist for adjusting the Interest Coverage Ratio threshold?", "Which financial metrics must be precisely defined to avoid ambiguity in this clause?", "What are the most common pitfalls or loopholes that weaken enforceability of Interest Coverage Ratio covenants?", "How does this clause compare to Debt Service Coverage Ratio provisions in terms of lender protection?", "What evidence is most persuasive in court when enforcing an Interest Coverage Ratio breach?"], "drafting_tip": "Specify the calculation method, define the measurement period, and state the minimum required ratio to ensure clarity, consistency, and enforceability.", "explanation": "The Interest Coverage Ratio clause sets a minimum threshold for a borrower's ability to meet interest payments on its debt, typically by requiring that earnings or cash flow exceed interest expenses by a specified multiple. In practice, this clause is often used in loan agreements or bond covenants, where the borrower must regularly demonstrate compliance by providing financial statements showing the ratio is maintained above the agreed level. Its core function is to protect lenders by ensuring the borrower remains financially stable and capable of servicing its debt, thereby reducing the risk of default."}, "json": true, "cursor": ""}}