Banking · Project Finance Coverage Ratios
In the context of long-term project financing, while Loan Life Coverage Ratio (LLCR) assesses the debt repayment capacity during the tenor of the loan, the Project Life Coverage Ratio (PLCR) is monitored to understand the 'tail' or safety margin available to lenders. Which of the following statements accurately defines the PLCR?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The annual net cash flow from operations divided by the total principal and interest due in a specific financial year.
- 2The total capital expenditure of the project divided by the equity contribution of the sponsors including any subordinated debt.
- 3The ratio of the present value of all future cash flows available for debt service over the entire economic life of the project to the outstanding debt principal.✓
- 4The ratio of net operating income to the total interest expense of the project calculated during the construction phase only.
Correct answer
The ratio of the present value of all future cash flows available for debt service over the entire economic life of the project to the outstanding debt principal.
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