GA Telesis Loan-To-Value vs. Long-Term-Value / By Abdol Moabery
Whenever there is a hint of recession, in sectors where secured leverage is used to boost investment yields, talk about LTV (loan-to-value) tests on assets and portfolios starts to percolate. These tests, propagated by banks, are a covenant put in place to protect the lender from a drop in asset value. One fundamental problem with LTV tests is that they do not account for cashflow support generated by the underlying asset. For example, if a… Read more