Maximum Leverage
Short definition
Maximum leverage is the highest net debt/EBITDA (or similar) allowed by policy or by the facility. It is not a universal “right” gearing; stress and the refinancing window set it.
Detailed explanation
An internal cap inside the bank cap creates a flexibility reserve. The reverse makes every investment a breach candidate. An acquisition model must talk price without breaching the cap.
Sector, cash-flow stability and collateral move the cap. Pushing the cap at the cycle peak is a trough breach.
Why it matters for the CFO
Dividends, buybacks and M&A are queued under this cap.
How to read it
Internal cap 3.0x, bank 4.0x → 1.0x policy cushion. 3.0x is not a universal optimum.
Related calculators
Güven Sayılgan’s writing on this topic
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Definitions are educational. They are not investment, credit or tax advice.