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    Project finance / Debt

    Debt Sculpting

    The debt a cash flow can support at a target coverage ratio, and the repayment profile that keeps coverage flat. Sculpting takes cash exactly down to the covenant each year instead of using a level annuity.

    Debt capacity$226,464,217Maximum annual service$30,769,231Coverage1.30×
    Debt capacity
    $226,464,217
    at 1.30× DSCR
    Maximum annual service
    $30,769,231
    CFADS over the covenant
    Coverage
    1.30×
    Flat by construction
    Interest in year 1
    $13,587,853
    On the opening balance
    Sculpted schedule
    Debt capacity is the present value of the maximum annual debt service.
    Sculpted schedule
    YearOpening balanceInterestPrincipal
    1$226,464,217$13,587,853$17,181,378
    2$209,282,839$12,556,970$18,212,260
    3$191,070,579$11,464,235$19,304,996
    4$171,765,583$10,305,935$20,463,296
    5$151,302,287$9,078,137$21,691,094
    6$129,611,193$7,776,672$22,992,559
    Inspect the model
    Choose a quick result view, a scaled comparison, or the complete diagnostic set.
    Debt capacity against tenor
    Capacity grows with tenor but at a declining rate.
    Debt capacity against tenor0.00079.05158.11237.16316.22395.275y5y8y8y10y10y15y15y20y20yDebt Sculpting
    Canonical equations
    The exact relationships implemented by this engine.

    PV = DS·(1 − (1+i)^−n)/i · Annuity at the maximum service.

    CFADS / DS ≥ covenant · The binding constraint.

    finance methodology

    A clear path from inputs to results.

    The debt a cash flow can support at a target coverage ratio, and the repayment profile that keeps coverage flat. Sculpting takes cash exactly down to the covenant each year instead of using a level annuity.

    Step-by-step methodWorked exampleAssumptions explained

    How to use

    1. Set annual cfads ($m).
    2. Set target dscr (×).
    3. Set interest rate (%).
    4. Set tenor (years).
    5. Read the headline metrics, then check the table for the detail.

    The formula

    PV=DS⋅(1−(1+i)−n)/iPV = DS·(1 − (1+i)^−n)/i

    Reference: Debt capacity as the present value of the maximum annual service (Brealey, Myers & Allen, Principles of Corporate Finance).

    Worked example

    At the default inputs

    Inputs
    • Annual CFADS ($M): 40; Target DSCR (×): 1.3; Interest rate (%): 6; Tenor (years): 10
    Calculation path
    1. 1

      Debt capacity: $226,464,217 · Maximum annual service: $30,769,231 · Coverage: 1.30× · Interest in year 1: $13,587,853

    Result

    Debt capacity: $226,464,217 · Maximum annual service: $30,769,231 · Coverage: 1.30×

    Interpreting the result

    At 1.30× cover and 6.00%, $40,000,000 of CFADS supports $226,464,217 of debt.

    Assumptions & limitations

    • Flat CFADS.
    • Interest rate fixed for the tenor.

    Frequently asked questions

    What is sculpting?

    Taking cash exactly down to the covenant each period rather than paying a level annuity.

    Why does capacity grow with tenor?

    Because the present value of a longer annuity is larger, at a declining rate.

    Methodology last reviewed 2026-10-22. Results are informational and not financial or engineering advice — see our disclaimer.