Catalog

	Table of Contents
p. 169 of 203 BACK | NEXT Foreword 1. Introduction to the Guidelines 2. User Instructions 3. Preparing and Appraising Investment Project 4. Financial Management of Executing Agencies 5. Reporting and Auditing 6. Financial Institutions 7. Knowledge Management 7.1. Useful Websites 7.2. Operations Manual (OM) 7.3. Project Administration Instructions (PAIs) 7.4. International Standards 7.5. International Accounting and Auditing Architecture 7.6. Financial Review Checklist for RRPs 7.7. Appraisal Checklist: Nonrevenue-Earning Project 7.8. Appraisal Checklist: Revenue-Earning Project 7.9. Appraisal Checklist: Private Sector Project 7.10. Appraisal Checklist: Financial Institution 7.11. Undertaking Sensitivity and Risk Analyses 7.12. Model Operating Covenants 7.13. Model Capital Structure Covenants 7.13.1. Debt Service Coverage (Version A: Historical orientation) 7.13.2. Debt Service Coverage (Version B: Forecast orientation) 7.13.3. Debt-Equity Ratio 7.13.4. Capital Adequacy Ratio 7.14. Model Liquidity Covenants 7.15. Commonly Used Ratios 7.16. Model Financial Statements: Service Organization 7.17. Model Financial Statements: Manufacturing Organization 7.18. Model Terms of Reference for an Auditor 7.19. Audit Report Questionnaire Addendum

Financial Management and Analysis of Projects : 7. Knowledge Management : 7.13. Model Capital Structure Covenants

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7.13.2. Debt Service Coverage (Version B: Forecast orientation) (see 3.6.3.3)

1. For the purposes of this Loan Agreement, all financial calculations, ratios, and financial covenants shall be applied in respect of the Borrower's Operations only.
2. Except as ADB shall otherwise agree, the Borrower shall not incur any Debt unless a Reasonable Forecast of the revenues and expenditures of the Borrower shows that the estimated Free Cash Flows of the Borrower for each Fiscal Year during the term of the Debt to be incurred shall be at least _____times the estimated Debt Service Requirements of the Borrower in such year on all Debt of the Borrower including the debt to be incurred and no event has occurred since the date of the forecast which has, or may reasonably be expected in the future to have, a material adverse effect on the financial condition of future operating results of the Borrower.
3. For the purposes of this Section:³⁴
   1. The term "Borrower's Operations" refers to the [identify relevant part of the operations] operations of the Borrower.
   2. The term "Debt" means any indebtedness of the Borrower maturing by its terms more than one year after the date on which it is originally incurred.
   3. Debt shall be deemed to be incurred: (a) under a loan contract or agreement or other instrument providing for such Debt or for the modification of its terms of payment on the date of such contract, agreement or instrument; and (b) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into.
   4. "Free Cash Flows" means the difference between:
      1. the sum of revenues from all sources related to Operations and Net Non-operating Income, after making adequate provisions for uncollectible Debts; and
      2. the sum of all expenses related to Operations including administration, maintenance, taxes and payments in lieu of taxes, but excluding provision for depreciation, other non-cash operating charges, movements in Working Capital, and interest and other charges on debt.
   5. "Net Non-operating Income" means the difference between:
      1. revenues from all sources, including extraordinary gains, other than those related to operations; and receipts relating to the disposal of physical assets; and
      2. expenses including taxes and payments in lieu of taxes, and including extraordinary losses, incurred in the generation of revenues in (v)(A) above; and payments for the purchase of physical assets, whether or not actually paid.
   6. The term "Working Capital" means the difference between Current Assets and Current Liabilities at the end of each Fiscal Year.³⁵
   7. The term "Current Assets" means all assets which could in the ordinary course of business be converted into cash within twelve months, including accounts receivable, marketable securities, inventories and prepaid expenses properly chargeable to operating expenses within the next Fiscal Year.
   8. The term "Current Liabilities" means all liabilities which will become due and payable or could under circumstances then existing be called for payment within twelve months, including accounts payable, customer advances, debt service requirements, taxes and payments in lieu of taxes, and dividends.
   9. The term "Debt Service Requirements" means the aggregate amount of repayments (including sinking fund payments, if any) of, and interest and other charges on Debt..
   10. The term "Reasonable Forecast" means a forecast prepared by the Borrower not earlier than nine months prior to the incurrence of the Debt in question, which both ADB and the Borrower accept as reasonable, and to which ADB has notified the Borrower of its acceptability.
   11. Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Guarantor, Debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is at the time of such valuation obtainable for the purposes of servicing such Debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to ADB.

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³⁴ The definitions may be incorporated into the general definitions section.
³⁵ The definition of Fiscal Year should be incorporated into the general definitions section as ' "Fiscal Year" means the accounting year of the Borrower commencing on ___ and ending on the following ____ or such other period as the Borrower, with ADB's consent, designates as its accounting year.'

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