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'Fake Ebitda' masks risk in debt-laden companies, says report

The S&P analysts this week said the latest data reinforces their view that those Ebitda figures are "not a realistic indication of future Ebitda

FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, US (Photo: Reuters)
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During the days of easy money, one of the most widely tracked numbers in credit markets became an unfortunate punchline.

Ebitda, which stands for earnings before interest, taxes, depreciation and amortization — a figure that’s akin to a company’s cash flow and, thus, its ability to pay its debts — was instead mocked as a marketing gimmick. When bankers and private equity firms asked investors to buy a piece of their loans funding buyouts and other transactions, they would layer on so-called add-backs to earnings projections that, to some, defied reason.

“Ebitda: Eventually busted, interesting theory, deeply aspirational,” one Moody’s analyst joked

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First Published: Feb 19 2023 | 11:17 PM IST

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