Synthetic Credit Rating
A credit rating estimated from financial ratios, most commonly interest coverage (EBIT divided by interest expense), when a company is unrated or has no liquid traded debt. Read the rating off a coverage ladder, then add that rating’s spread to the risk-free rate to get a cost of debt. The standard route for private companies. Cross-check it against what the company most recently actually borrowed at.
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This term comes up constantly in valuation interviews and on the desk.
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