Theamountofdebt that they can incur is usuallygoverned byvariousratiossuch asFixedChargeCoverage ratios, Debt-to-EBITDA ratios, Debt-to-Capital ratios, andetc.
Back in the late '80s, Drexel Burnham was busy coming to market with a succession of shaky leverage buyout deals with fixed-charge coverage ratios of just one times.
For cyclical properties like airlines, industrials and even hotels, fixed-charge coverage of just one (suggesting that a company's earnings are just enough to satisfy debt, lease and principal repayment over the next year) can evaporate overnight.