Board of Governors of the Federal Reserve System

Data Dictionary

Item Number K668

Call confidentiality applies to FFIEC 031/041.

Data Description:

Report the balance sheet amount of leveraged loans and securities. Leveraged loans and securities include:
(1) All commercial and industrial loans (funded and unfunded) (as defined for Schedule RC-C, part I, item 4) with an original amount1 greater than $1 million that meet any one of the conditions2 below at either origination or renewal;
(2) Securities issued by commercial borrowers that meet any one of the conditions below at either origination or renewal, except securities reported as trading assets; and
(3) Securitizations that are more than 50 percent collateralized by assets that meet any one of the conditions below at either origination or renewal, except securities reported as trading assets.
Leveraged loans exclude loans secured by real estate (as defined for Schedule RC-C, part I, item 1) and loans to finance agricultural production and other loans to farmers (as defined for Schedule RC-C, part I, item 3).
The conditions to be considered when evaluating whether loans or securities should be reported as leveraged loans or securities are:

Loans or securities where the borrower's total debt or senior debt to trailing twelve-month earnings before interest, taxes, depreciation, and amortization (EBITDA) (i.e., operating leverage ratio) is greater than 4 or 3 times, respectively. For purposes of this calculation, the only permitted EBITDA adjustments are those adjustments specifically permitted for that borrower in its credit agreement; or

Loans or securities that are designated as highly leveraged transactions by the syndication agent.

For the purposes of calculating debt/EBITDA ratios, total debt is defined as short-term borrowings plus long-term borrowings as follows:

-Short-term borrowings include bank overdrafts, short-term debts and borrowings, repurchase agreements (repos), the short-term portion of long-term borrowings or debt, current obligations under capital (finance) leases, trust receipts, and bankers acceptances.

-Long-term borrowings (or long-term debt) include all interest-bearing financial obligations that are not previously captured in short-term borrowings. These obligations include debentures, bonds, loans, mortgage debts, sinking funds, long-term bank overdrafts and capital (finance) lease obligations, including those obligations that are convertible, redeemable, or retractable. They also include mandatory redeemable preferred and trust preferred securities accounted for as liabilities in accordance with ASC Subtopic 480-10, Distinguishing Liabilities from Equity - Overall (formerly FASB Statement No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity"), and subordinated capital notes. Long-term borrowings exclude the short-term portion of long-term debt, pension obligations, deferred tax liabilities, and preferred equity.
Senior debt shall include any portion of total debt as previously defined that has a priority claim on the assets of the borrower.
All undrawn credit lines should be considered fully drawn when calculating either senior debt/EBITDA or total debt/EBITDA ratios for the purposes of the definition of leveraged loans and securities.
Institutions should report the balance sheet amount of leveraged loans that have been funded as well as the unfunded portion of leveraged loans. Institutions should report unfunded amounts that include the unused portions of irrevocable and revocable commitments to make or purchase leveraged loans.
The amount to be reported for leveraged loans and securities should include purchased credit impaired loans and securities as defined in ASC Subtopic 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality (formerly AICPA Statement of Position 03-3, "Accounting for Certain Loans or Debt Securities Acquired in a Transfer"), provided the loans and securities meet the definition of a leveraged loan or security.

The amount to be reported in this item should exclude amounts recoverable on leveraged loans and securities from the U.S. government, its agencies, or government-sponsored agencies, under guarantee or insurance provisions.