Covenant Trip Probability Calculator

Covenants may trip under stress. This calculator estimates.

Current DSCR

Covenant DSCR minimum

NOI volatility %

Loan term years

Trip probability %

89.09%

Current cushion %

11.11%

Annualized trip risk %

27.13%

How the math works

Cushion = (current − covenant) / current. Annual probability ~ f(cushion / volatility). Term probability = 1 − (1 − annual)^years.

1.35 DSCR with 1.20 covenant: 11% cushion. NOI vol 12%: cushion ~1 std. Approx 16% annual probability; 67% over 7 years. Build cushion to 1.45+ for meaningfully lower trip risk.

How to Use

Enter current DSCR.
Enter covenant DSCR minimum.
Enter NOI volatility %.
Enter loan term years.
Read probability of trip.

Frequently Asked Questions

Common covenants?

DSCR (1.20 typical). Debt yield (7-9%). LTV (70-75%). Occupancy (85%+). Major tenant health (anchors). Maintenance capex ratio. Financial reporting timeliness. Each has cure period (often 60-90 days) before default.

Trip consequences?

Cash sweep (excess cash flow to lender until cured). Accelerated reserves. Mezz/pref pay-in-kind. Eventually: acceleration and default. CMBS: cash management triggered — borrower loses operational discretion. Painful process even pre-default.

Mitigation?

Maintain cushion above minimums (e.g., 1.35 vs 1.25 required). Stress test annually. Rapid communication with lender if trending toward breach. Cure mechanisms (additional reserves, prepayment) to restore coverage.

How often should I rerun this?

Rerun this calculator whenever inputs change materially — new rent roll data, rate moves, loan balance updates, or quarterly operating data. For active deals, monthly refresh is typical. For stabilized assets under monitoring, quarterly is fine. Treat the output as a decision tool, not a one-time answer — market conditions evolve and so should your analysis.