Debt service coverage ratio (DSCR)
Cash available for debt service divided by the debt service specified for the same period.
How it works
The debt service coverage ratio (DSCR) divides the cash available to pay debt over a period by the debt payments due in that period. A DSCR of 1.30x means there is 30% more cash than needed for interest and principal. It can be measured on historical results, on projections, or both.
In GPU and data centre deals
DSCR is used twice in AI infrastructure finance. At signing, a minimum projected DSCR sets how much can be borrowed against contracted cash flows. During the loan, DSCR tests trigger cash traps, sweeps or defaults if cash falls. Levels differ by structure: GPU loans, data centre project finance and ABS each use their own definitions and thresholds, so the numbers are only comparable once the definitions are read.
What gets negotiated
- What counts as cash flow, and which costs are deducted
- Historical, projected or both
- Lock-up, cash trap and default levels
- Equity cure rights if the test is failed
Why the distinction matters
Reconcile the cash definition, principal included, hedge payments and forward-looking assumptions. A numerator based on earnings is not automatically cash available for debt service.
Read the structure
A practical reading of securitised data-centre cash flows, triggers and expected repayment.
Data centre ABS: follow the pool and the waterfall ↗In the filed deals
Public levels range from 1.05x (IREN Hardware 3 minimum) to 1.40x (CoreWeave DDTL 3.0) in GPU loans, and 1.30x to 1.35x cash trap levels in data centre ABS.
For in-house counsel
Debt service coverage ratio in the filed documents
Where the term turns up in filed contracts and what is market, for the lender’s or the borrower’s side. Previews are open; the full text is free with InfraCompute Weekly.
- What’s market: Minimum DSCR covenant in GPU loansWhat minimum DSCR do GPU lenders set as an event of default?
- What’s market: What goes into the DSCR in GPU loansIs the DSCR calculated on contract cash flow or on operating income?
- Clause library: DSCR cash trap in GPU loansGPU-backed loans borrow the ABS idea and test the historical DSCR of the customer contract cash flows. Below the trap level, cash…
- The legal desk for in-house counselContract library, issues lists, checklists and English law notes.
Related terms
Explanatory definition, not a statement that a particular transaction contains this term or a substitute for its contractual definition.
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