financial-metrics
Debt-to-EBITDA is a leverage ratio: interest-bearing debt (sometimes net of cash) divided by EBITDA. It is the common language of credit agreements, rating conversations and LBO debt capacity.
Credit markets do not primarily ask “how big is the loan?” They ask “how many years of EBITDA would it take to repay it if every euro of EBITDA were available?” That heuristic is Debt-to-EBITDA.
Gross leverage = Interest-bearing debt / EBITDA
Net leverage = Net debt / EBITDA
Net debt subtracts surplus cash (and often adds debt-like items: vendor loans, unfunded pensions, deferred consideration). Facility agreements define both numerator and denominator in a schedule that can run for pages — “EBITDA” there is not the teaser EBITDA.
Illustration only. Hypothetical LBO at close.
| Amount | |
|---|---|
| Senior term loan | €28m |
| Shareholder loan (if treated as debt) | €4m |
| Cash | €3m |
| Gross debt | €32m |
| Net debt | €29m |
| Bank EBITDA (covenant definition) | €8.0m |
| Net leverage | 3.6x |
| Maintenance covenant | 4.5x |
Headroom is 0.9x. If year-1 EBITDA is 10% light and cash is used, leverage can gap toward the covenant without a “crisis” in the operations. Large sponsor-backed platforms in insurance distribution and other roll-up sectors often live in this grammar of leverage, not in P/E ratios.
Investment-grade corporates often sit below ~2x net leverage; leveraged mid-market deals commonly close in the 4–6x area depending on cycle, sector and interest cover. The ratio is only as good as EBITDA quality and the treatment of leases, earnouts and factoring.
Sculpting the capital structure; comparing financial buyers; rating-agency conversations; monitoring post-close.
A 3x leverage company with no capex and a 6x company that is a cash machine can invert on free cash flow. Cyclical EBITDA at a peak makes the ratio look safer than it is. Currency mismatches between debt and EBITDA create optical comfort.
Dazur computes teaser leverage and covenant-style leverage as two fields. Buyers who only see the first number are not looking at the document that can actually accelerate the debt.