DSCR Sensitivity Analysis
What is DSCR sensitivity in AI infrastructure?
DSCR (Debt Service Coverage Ratio) sensitivity measures how changes in operating variables—primarily power costs and GPU utilization—affect a project's ability to service debt. For AI datacenters, a DSCR below 1.20x typically triggers 'cash traps' or technical defaults in loan covenants.
Key Data Points
- Standard DSCR Floor: 1.20x - 1.25x
- Primary Variable: Power Cost ($/kWh)
- Secondary Variable: GPU Utilization %
- Default Risk: Triggered at DSCR < 1.0x
- Mitigation: Hedging energy costs & long-term take-or-pay contracts
Why DSCR Sensitivity Matters
The Power Price Pivot
In markets like ERCOT or PJM, power prices can spike by 50-100% during extreme weather. Since power is the largest OpEx item, a $0.02 increase in $/kWh can drop DSCR from a healthy 1.50x to a dangerous 1.15x overnight.
Utilization Volatility
For spot-market GPU providers, utilization is the second major lever. If cluster occupancy drops from 90% to 70%, the revenue shortfall directly compresses the net operating income (NOI) available for debt service.
Frequently Asked Questions
What is a typical DSCR requirement for GPU loans?
Most private credit lenders require a minimum DSCR of 1.25x. Tier-1 banks may require 1.35x or higher for non-recourse project financing.
How do I calculate NOI for DSCR?
NOI (Net Operating Income) = Total Revenue - (Power Costs + Colocation Fees + Maintenance + Insurance). It excludes depreciation and interest expense.
What is a "Cash Trap" covenant?
A cash trap is triggered if DSCR falls below a certain threshold (e.g., 1.15x). The lender stops the borrower from distributing cash to equity owners, keeping it in the project to build a reserve.
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