Evaluation Criterion Based on the Loan Life Cover Ratio

The Loan Life Cover Ratio (LLCR) is defined as the ratio between the discounted sum of cash flows available for Debt Service, which are between the valuation instant and the last projected year for loan repayment, and the residual debt considered at the same instant of valuation. The numerator of the ratio represents the present value of project-generated cash flows on which the financiers can rely for future repayment of the amounts still owed (expressed in the denominator). Based on the above, it is evident that the higher the considered coverage index assumes values above unity (equilibrium point), the greater the financial soundness of the investment and the repayment guarantee obtained from financiers.
