Adjusted / Covenant EBITDA Bridge
Build an adjusted EBITDA from reported EBITDA with add-backs, deductions and an optional cap. These are modelling assumptions — permitted add-backs depend entirely on your credit agreement.
Inputs
Permitted add-backs are contractual. This bridge models your assumptions and does not determine what is actually permitted under your agreement.
Methodology
- Covenant EBITDA
- Reported EBITDA + allowed add-backs − deductions.
- Add-back cap
- If a cap is entered as % of reported EBITDA, allowed add-backs = the lower of eligible add-backs and (reported EBITDA × cap %). Excess is excluded and shown.
- Not universal
- No add-back is universally permitted. Restructuring, synergies and exceptional items may or may not be allowed — check your credit agreement.
Worked example
- Reported EBITDA: £1,000,000
- Entered add-backs: £300,000; cap 20% → max allowed £200,000
- Allowed add-backs: £200,000; excluded by cap: £100,000
- Covenant EBITDA = £1,200,000
Interpretation & limitations
A higher covenant EBITDA lowers leverage and improves coverage, but only add-backs that are actually permitted under your agreement should be included. Caps and baskets often apply. This calculator does not interpret your agreement — it models the figures you enter.
Related tools
Your financial data stays on your device. Calculations run entirely in your browser. Nothing is uploaded or saved.
Understanding covenant EBITDA
Covenant EBITDA is the measure of EBITDA used for calculations under a particular credit agreement. It may differ from reported or accounting EBITDA because the agreement can permit specified adjustments, add-backs or deductions when calculating financial covenants.
These adjustments can affect leverage and coverage ratios materially. The relevant measure is therefore not necessarily the EBITDA shown in the financial statements, but the EBITDA calculated in accordance with the definitions and provisions of the applicable finance documents.
Why adjustments matter
Permitted adjustments may relate to items such as restructuring costs, exceptional or non-recurring expenses, acquisitions, disposals, synergies or other specifically defined items. Their treatment varies between agreements, and some adjustments may be subject to individual limits, aggregate caps, time limits or other conditions.
An add-back can increase covenant EBITDA and therefore reduce calculated leverage or increase calculated coverage. For that reason, the amount and eligibility of adjustments can have a significant effect on covenant headroom. An adjustment should only be included where it is permitted under the definition being modelled.