A Practitioner’s Guide to One Borrower, Four EBITDAs, and the Number That Decides Whether the Loan Is Repaid
Julian R. Sterling
These are the companion files of Credit Analysis by Julian R. Sterling.The book on Amazon →
The four Excel workbooks that go with the book, corrected and completed: every figure the book prints is
reproduced by a live formula and checked to its last printed decimal — 352 checks, and where the book is wrong
the check says so. Around them: the same four models with the inputs emptied, thirteen working documents to print,
forty questions that mark themselves, and three cases the book names and never takes to a number.
Nothing is locked, protected or watermarked.
Free to download. No sign-up, no email address, nothing to fill in.
The four workbooks, the blank set, the working documents, the forty questions and the three cases, with a read-me. The workbooks alone: The_Four_Workbooks.zip (87 KB).
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These carry the book’s own figures. Each now has a sheet the first files lacked, computing the figures the book prints
and they left out, and a Checks sheet that tests to the last printed decimal.
Chapters 1, 5, 6 and 8
Halstead — the four EBITDAs
The add-back bridge with a switch on every line. Six adjustments from
management — restructuring described as non-recurring, run-rate savings from a closed
plant, the full-year effect of an acquisition, sponsor fees, share-based payment, foreign
exchange — and the four quality-of-earnings haircuts that answer them, each one a cell
you turn on or off. The four leverage ratios recompute as you do:
4.8780x statutory, 3.1915x on management's number,
4.2164x on the lender's, 6.4655x on cash.
The spread of 3.2740 turns is a formula, and so is its decomposition: 1.0250
taken back by the review plus 2.2491 that nobody argued about because leverage is not measured on
cash. The 1.6866 turns of add-back argument contain the 1.0250 (and 0.6616 conceded above the
audited number), which is why the three gaps the book lists add up to 4.9606, not 3.2740. Set the add-backs against the covenant headroom of
0.0336 of a turn and the ratio the book is named for —
fifty to one — is a single cell.
New sheet, Margins and Cash: the four margins, the signed number walked to cash
(180,000 short of debt service before a single add-back), and the debt each EBITDA
supports. The three deductions from earnings to cash are 9,900,000, not the 10,200,000
Chapter 6 prints. And the monitoring fee the review leaves standing, paid in cash as Chapter 6
says it is, takes cover on the cash actually left to 1.1734x, below the 1.20x test:
0.4073 of a turn on cash leverage, not the “full turn” the book promises.
Both tests on your own levels rather than the book's. Debt service of
14,880,000 against cash available of 18,560,000, a cover of
1.2473x on a 1.20x test, and leverage of 4.2164x on a 4.25x test. Two
covenants, both held, and one of them a rounding error from breach.
Then the question that decides which one you monitor. The leverage test breaks on a fall in
EBITDA of 0.7895 per cent; the cover test breaks on a fall in cash of
3.7931 per cent. Leverage binds — by a factor of nearly five in the two
tests’ own units, and of 3.1330 like for like, both measured on EBITDA — and it binds
because it is measured on the quantity that carries the adjustments. Change either level and
watch the binding test change hands.
New sheet, Package and Rate: the cover family, the rate that breaks cover
(7.8889 per cent, 48.9 basis points above the price), the four controls of
Chapter 11 priced on the bridge (the frozen-policies line is 3.9139x, not 3.9140x), the caps,
the levels and the cures.
A downside case that stops at EBITDA has done a third of the job. Eight per cent off revenue
becomes 17.6 per cent off EBITDA through operating leverage, and
26.9879 per cent off cash once the maintenance capital expenditure and the
cash tax that do not shrink are taken out — an amplification of
3.3735 times, shown in both of its stages. Leverage goes to 5.1170x and
cover to 0.9107x: both covenants broken on a revenue fall a board would call
a soft year.
The recovery is then computed where defaults actually happen, on the downside EBITDA rather
than on the number the loan was sized against. Seven exit multiples, enforcement costs, and
the multiple solved for: the lender needs 5.4437x in default to be repaid in
full, having lent at 4.2164x and having been shown 3.1915x. The gap of
1.2272 turns is the credit decision, and it is the line the paper leaves out.
New sheet, Curve and Levers: the curve, the softeners, the lines held still and what moves
recovery. Three corrections. Moving revenue alone with the three deductions held gives cover of
1.0943x, not the 1.1475x Chapter 16 prints. In year two, deferred maintenance
returning leaves cover 0.1867 below year one, not 0.1785. And running recovery on
the lender’s EBITDA overstates it by 15.6947 points, which is 0.85 of a turn of
exit multiple, not “more than a full turn”.
A margin is a number until it is set against an expected loss. Recovery
73.4799 per cent, loss given default 26.5201, an assumed default probability
of 4.0000 and an expected loss of 1.0608 per cent — which consumes
26.5201 per cent of a 4.0000 per cent margin and leaves 2.9392. Then the same computation run
backwards: the default probability at which the whole margin is gone is
15.0829 per cent at a 4.0x exit, and 8.9107 at 3.0x. Half a
turn of exit multiple moves the answer more than any plausible revision to the default rate.
And the amendment, priced properly. A reset from 4.25x to 5.25x buys tolerance for a
19.6868 per cent fall in EBITDA instead of 0.7895, at a fee of 1,200,000 and
a ratchet of 600,000 a year — 3,600,000 as the letter reads,
3,420,000 as it is actually collected on an amortising balance. It costs
0.1646 of a turn of cover against 0.0473 of cover headroom, so the amendment
breaks the covenant nobody reset. The workbook also prices the branch the fee is beside the
point in: a year of forbearance costs 15,518,960.23 of recovery.
New sheet, Margin and Monitoring. The package is 3,600,000 because four years of ratchet are
2,400,000: Chapters 3 and 11 print 3,600,000 for the ratchet and 4,800,000 for the
package, so it is 20.2703 per cent of the four-year margin (not 27.0270) and 3.0000 per cent of the
facility (not 4.0000). Chapter 17’s leverage trigger of 4.1000x sits below the
4.2164x at close: it is tripped on the day of signing. And the gap between a 4.0x and a 3.0x
recovery costs 2.94 times what 25 basis points of margin buy, not two and a half.
The four workbooks with the Inputs sheet emptied. The checks sheets count what is still missing and test what holds for any inputs.
All chapters
Your borrower, your bridge, your covenants
The Inputs sheet is the same in all four: revenue, statutory EBITDA, up to six add-backs and four haircuts with their switches (rename them), the three deductions to cash, the facility, both covenants, and the downside, recovery and pricing assumptions. Eighteen cells are required; every other sheet stays empty until they are filled.
The book’s inputs are listed in a text file inside the archive. Type them back in and the book’s figures come back with them: 4.2164x on the lender’s EBITDA, 1.2473x of cover, 5.4437x needed in default.
Blank_Model_Set.zip · four XLSX and book_inputs.txt
The documents the chapters describe
Thirteen pages to print and use. A4, with margins wide enough for US Letter.
Chapters 2 to 18
Thirteen working documents
The hour of reading before the model, with the three reconciliations. The add-back bridge priced line by line. Reading a quality-of-earnings report you did not commission. EBITDA to cash over three years. Leverage four ways, and what goes missing from net debt. The cover schedule with the cushion in money and the break-even rate.
Which test binds, at close and in the downside, with the sentence for the paper. The covenant package that would survive. The downside run properly, with the reverse test. Recovery at the EBITDA that exists in default. Pricing an amendment request. The credit paper’s first page. Monitoring on one page, with the price in one line.
A workbook that marks itself. Answer in the yellow cells; the marking fills in as you go.
All parts of the book
Forty questions on the book
Seven on the borrower and the number, seven on the bridge, the review and the cash, seven on leverage and the covenants, seven on the downside and the recovery, six on the amendment, the paper, monitoring and the price, and six on the three cases. Numbers are answered as numbers, to the precision the question asks for; the reasons are on the last sheet.
New material, not a restatement. Three situations the chapters name and never take to a number. Each case is one workbook: the note is the first sheet, the model is the rest, the checks are the last.
Chapters 5 and 6 · Case one
The fee that is still paid
The sponsor monitoring fee the review leaves standing because payment is blocked on an event of default. Paid in cash while the credit performs, it puts cover on the cash actually left at 1.1734x, below the test, and the blocker never bites because the default it waits for is defined on a number that adds the fee back. A blocker keyed to the cover test lets 704,000 through in year one; in the downside a blocked fee accruing at 8 per cent (ADDED) reaches 4,956,723 at maturity, and ranking it alongside the senior debt costs 4.51 points of recovery.
Chapter 7 · Case two
The tax shelter that runs out
The chapter’s 4,000,000 rise in cash tax in year three, run year by year on the amortising facility with the business held flat (ADDED). Cover falls to 1.0406x in year three; the covenant absorbs 1,769,600 of the rise, and a cash tax rate of 23.30 per cent breaks it. And the ranking the book establishes at signing inverts through amortisation alone: from year two, before any rise, cover binds and leverage does not.
Chapter 15 · Case three
Amend or enforce: the probability that decides
The chapter prices both branches of the reset and never the probability that chooses between them. Before any fee, amending beats enforcing if the business recovers with a probability above 32.78 per cent; the fee moves that by 2.44 points, a year of time value lifts it to 34.88, and 10,000,000 of claims coming to rank ahead during the year (ADDED) to 40.10.
an input cell; everything else on the sheet is a formula
Black text
a formula — do not overtype these
Checks sheet
the printed figure beside the computed one, to the last printed decimal, with a PASS or a FAIL; where the book is wrong, the note says what it prints
Why the checks matter more than the models
A workbook that agrees with a book proves nothing on its own — the author wrote both. What
the Checks sheets do is different: they force the model to reproduce a number that was printed
before the model existed, from a formula rather than from the number itself.
On this book the discipline caught two things a reading would not. The first was a label: three
rows of the bridge begin with an equals sign, and a spreadsheet reads that as a formula rather
than as text, so three cells rendered an error in every workbook. Nothing depended on them and no
figure was wrong, which is exactly why nobody would have noticed. The second was a ratio the book
described as a multiple of the amendment fee when it was computed on the whole package —
4.3108 times the 3,600,000, and 12.9325 times the 1,200,000 fee alone. The book
now says both, because both are true and only one was written down.
A second pass, in September 2026, found that the checks themselves proved little: a tolerance of
0.05 of a turn on ratios printed to four decimals, and one recorded figure (94.2685 for 94.2682) that
passed anyway. Tightened to the last printed decimal and extended to every chapter, they found ten
figures in the book that do not survive recalculation. Each is listed below, and each check row that
carries one says what the book prints.
Where a shortcut and the full computation disagree, both are shown. Expected loss is
1.0608 per cent on day-one exposure and 0.6271 averaged over
the amortising balance — a gap of more than a tenth of the whole margin, and neither figure
is wrong. The amendment costs 0.1646 of a turn of cover charging the ratchet twice, and 0.1259
charging it once. Neither gap is smoothed away.
Go beyond the companion files
Credit Analysis develops the complete framework behind these models, with the assumptions, trade-offs and worked examples tied together.
The workbooks open in Microsoft Excel, LibreOffice Calc, Google Sheets and Numbers; the PDF
prints on A4 and fits US Letter. They use
no macros and no add-ins, so nothing needs to be enabled or trusted. If your spreadsheet asks
to update links on opening, decline — there are none.
What changed, and when
24 Sep 2026
The four workbooks given a new sheet each and checks to the last printed decimal: 352, against 87. Ten figures in the book corrected: the three deductions to cash are 9,900,000, not 10,200,000; the spread is the review’s 1.0250 plus the cash gap of 2.2491, and the three gaps listed add up to 4.9606; the monitoring fee paid in cash is 0.4073 of a turn, not a full one, and takes cover to 1.1734x; the amendment package is 3,600,000, not 4,800,000 (20.2703 per cent of the margin, 3.0000 per cent of the facility); year two of the deferral ends 0.1867 below year one, not 0.1785; one variable at a time gives cover of 1.0943x, not 1.1475x; the overstated recovery is 0.85 of a turn, not more than one; the 4.1000x leverage trigger is tripped at close; the recovery gap costs 2.94 times 25 basis points, not two and a half; and a handful of roundings. Added: a blank set, thirteen working documents, forty questions that mark themselves, and three cases.
How should a lender price a covenant amendment?A 4.25x to 5.25x reset for a 1% fee and 50 bp reads as 3,600,000 but collects 3,420,000, and the step-up alone pushes cash cover to 1.1990x, under its 1.20x floor.
How do you calculate RAROC on a corporate loan?Risk-adjusted profit after tax over capital: a 4.00% margin with 1.06% expected loss earns 17.5% on 12.60m of capital. The 12% hurdle needs 3.23%.
Closing the DealTwo defensible bridges 20.70 million apart, a peg worth 7.00 million, and the six choices that remove 6.60 of a 12.00 earn-out.
CMBS and CRE CLOsWhere the loss actually lands, from appraisal reduction to realised severity, and what the B-piece is really being paid for.
How to Read a Commercial LeaseThe three refinements chapter 19 names and never performs, and the renewal rate below which the mark-to-market is worth nothing.
How to Read a Credit AgreementWhere the default actually comes from, the cure that costs 5.5 times the other, and the capacity nobody adds up.
How to Read a Real Estate Loan AgreementThe cure ratio in closed form, the four-point window in which the cheap cure works, and the cure sized to the wrong threshold.
Office Real EstateA six per cent yield that returns 3.2 per cent once the re-letting cycle is paid for, and the headline-to-net-effective rent arithmetic.
Private Equity Real EstateBoth worked waterfalls to the dollar, the two capital stacks, and the arithmetic of the promote made changeable.
Private Markets PerformanceThirty-one of the thirty-three figures chapter 19 publishes reproduce exactly — and the two that do not are named rather than quietly adopted.
Raising a Real Estate FundThe chapter 17 funnel run on a calendar — when the first close actually lands, and why more travel does not help.
Real Estate FinanceFour people look at one building and reach four numbers; the lender is whole only above 105,109,489, twelve per cent below today’s value rather than forty.
Real Estate Financial ModelingProperty, development and fund models built line by line, and the modelling test worked end to end.
Real Estate Fund ManagementThe waterfall of 6.11, the build-to-core of 8.7 and the proceeds gap, reproduced as live formulas rather than asserted.
REIT Analysis and ValuationFFO of 532.0, AFFO of 381.0, net asset value and dividend safety — every figure a formula you can change.
Retail Real EstateThe occupancy cost of every unit in a centre, the sixteen per cent of the rent roll no tenant can sustain, and the right-size-convert-or-hold decision priced.
Sale and LeasebackA €179.5 million transaction end to end, with rent cover measured on the entity that actually signs the lease.
Self-Storage Real EstateThe cohort engine behind a 590-unit store, and the rate increase on existing customers priced against the move-outs it causes.
The Fund Finance ProfessionalChapter 8 builds the reported-to-eligible NAV bridge; chapter 9 computes every ratio without it. Two points at every state — and what a subscription line does to the IRR.
The Growth Equity InvestorWhat a pro rata cheque really costs, and the band where defending your ownership loses money.
The Private Credit InvestorThe two coverage ratios are not measured on the same thing: the erosion is 47.7 per cent, not the 28.7 the headline implies.
The Private Equity Fund Controller PlaybookThe book defines IRR, DPI, RVPI and TVPI, tells you to update them at the exit, and prints not one value. Computed: a 1.833× deal inside a fund at 0.892 TVPI.
The Venture Capital AssociateWhat defending a position costs, and how many companies a reserve pool actually defends.
Financial Risk ManagementA fund inside every limit that cannot meet a redemption — and the number that decides it is the one with no currency attached.
Business ValuationThree advisers land 26.8 per cent apart on one company, and the whole gap turns out to be 1.96 points of perpetual growth.
Quantitative FinanceThree models agree to a quarter of one per cent about a number that one unobservable input moves a hundred and three times as much.
Asset ManagementFour people quote four returns for one mandate, all correct and 2.7017 points apart — forty-eight times the manager’s net skill.
Alternative InvestmentsA manager reports 13.29 per cent and the endowment earns 6.26 — both correct, and only a third of the advertised advantage arrives.
Venture CapitalOne company out of twenty-eight returns 56.7 per cent of the fund, and half the capital goes in after the decision — at half the return.
Machine Learning for FinanceFive people quote the accuracy of one credit model, all five are right, and the number that decides how much money it makes is none of them.
Commercial Real Estate InvestingThe equity earned 8.6647 per cent and the investor received exactly 8.0000 — the preferred return, and nothing above it.
Mergers and AcquisitionsThe board paper says the deal creates 13,436,667 of value. The arithmetic says it destroys 17,530,855. Nobody is lying.
DerivativesThe treasury report says the hedge cost 1,233,698. That is the interest differential, not a cost.
Treasury ManagementFive cash balances for one company, all correct and 145,600,000 apart — and the revolver that is two-thirds of the liquidity leaves at a revenue fall of 8.4127 per cent.
Financial Planning and AnalysisRevenue 3.0190 per cent above budget and operating profit 16.3209 per cent below it, in the same quarter, with every figure correctly stated.
Energy TradingA position report that is 91.7031 per cent hedged and correctly computed, on a book that is short 2,542,000 MWh — and a margin call of 198,400,000 the next morning.
Construction Cost ControlA contract sum of 26,301,102 became a final account of 29,153,363 on the building that was drawn — and 85.8 per cent of what was lost was knowable on the day it was signed.
Trade FinanceSix routes to payment on one 4,200,000 export order cost between 178,040 and 223,268, a spread worth 14.8 per cent of the margin, and a day of buyer credit costs 1,031.76.
Cost AccountingOne factory costed twice on the same 13,440,000 of overhead, and 4,053,091 moves between four product families.
Pricing StrategyA list price of 148.00, a pocket price of 112.51, and the nine deductions in between — with what one point of price is actually worth.
Contract ManagementA bid 5.50 a unit cheaper, signed on paper worth 9.81 a unit more — and 94.68 per cent of it was knowable on the day of signature.
Capital MarketsFour defensible readings of one bond, the cost of an issue under each convention, and the placement discount computed at a constant discount.
Financial RegulationThree ratios pass and the fourth is in breach by 1,956.0 million: the output floor, the liquidity buffer after encumbrance, and the loan split.
Bank ManagementFour defensible readings of one balance sheet, the deposit beta measured two ways, and the liquidity that lasts 3.9 days.
The Real Estate WorkoutFour ways out of one broken loan, discounted to today, and the 58.7 cents at which a payoff beats enforcement.
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