Babcock & Wilcox Enterprises (BW), a maker of energy and emissions control solutions, revealed it has violated its fixed charge coverage ratio (FCCR) debt covenant. The FCCR is a measure of a company’s ability to meet fixed charge obligations like interest and lease expenses expenses.

Babcock & Wilcox is supposed to maintain a fixed charge coverage of at least 1:1.

Not only did lenders let the violation slide, they renegotiated Babcock’s debt covenants in future periods to increase the likelihood the company remains compliant. In the current quarter, Babcock will have to maintain an FCCR of 0.55:1, nearly half the prior requirement. The requirement becomes more stringent in subsequent periods, ultimately requiring Babcock to maintain an FCCR of 1.25 to 1.00 for the fiscal quarter ending December 31, 2023.