All but one of the highlighted ratios are debt cover ratios. They measure the margin of comfort with which the project can perform its obligations to the providers of debt.
It is helpful when discussing some of these to remind ourselves of the principal milestones in the project.
■ The financing of the Transaction is dominated by a bond of £127.79m which was issued in 8 May 2000. That amount is held in an escrow account, and drawn down to cover the costs of reconstructing and redeveloping the Great George Street site as they fall due.
■ The bond holders are rewarded for their participation in the project by the receipt of semiannual coupon payments which start immediately (semi-annual in arrears).
■ Coupon payments continue for 35 years and 7 months until the bond is redeemed in 31 December 2035.
We recap this timetable to make two points.
■ The Transaction has a finite life of 37 and a quarter years. The Bidder's right to exploit the Great George Street site ceases after 17 August 2037. The bond matures twenty months before this date. This difference is intentional. If the project cannot service the bond in 35 years and 7 months as planned, then there is a 20 month tail to which it has resort, which provides a margin of safety for the bond holders. Ratios are quoted in which this cushion is and is not included are called respectively the Concession Life Cover Ratios (CLCR) and Loan Life Cover Ratios (LLCR). It would be usual to devote more attention to the LLCR, which will be lower than the CLCR ratios.
■ The bond is the largest part of the financing, but not the only one. There is also £6.6m of mezzanine debt. Ratios are quoted for the bond alone, labelled "Senior", and for the bond and the mezzanine combined, labelled "Total". The latter will be lower because they involve the same cash flows covering more debt.
The LLCR and CLCR are good measures of the project's ability to repay its borrowings in the long run. It takes into account the cash flows over many years, and in effect captures an average in which the times that are good offset the times that are not so good. The detail that is hidden by this average can be seen by looking at the cover ratios in specific periods. This is the role of the Annual Debt Service Cover Ratio (ADSCR). The lowest of these ratios, the minimum ADSCR, measures the project's ability to service its debt in the year when things are tightest.