Why does one market use a multiple and the other a ratio?
Because they are answering different questions about different borrowers. A corporate lender is lending to a business that will still exist in five years doing something it has not yet decided to do, so it uses a multiple of earnings as a proxy for value and for repayment capacity. A project lender is lending against a defined stream produced by one asset under contracts already signed, so it uses a coverage ratio and asks whether that stream services the debt period by period.
The corporate multiple is a compression of a great deal of uncertainty into a single number. It assumes earnings are durable, that they can be sold at a multiple if repayment fails, and that the management team will make sensible decisions with the freedom the documents leave it. A project ratio makes almost none of those assumptions, because it does not need to: the revenue is contracted, the uses of cash are dictated by a waterfall, and the borrower has been deliberately deprived of the discretion the corporate borrower relies on.
So the two markets are not measuring the same risk more or less conservatively. They are measuring different risks. Which is why the levels look irreconcilable when set side by side, and why a sponsor who tries to reconcile them usually concludes, wrongly, that one market is being reckless.
What are the published levels in each market?
In the corporate middle market, borrowers above $25m of EBITDA were seeing total debt of 5.00 to 6.50 times EBITDA and senior debt of 4.25 to 5.25 times in July 2026, while borrowers below $10m of EBITDA were seeing total debt of 2.50 to 3.25 times (SPP Capital Partners, Market At A Glance, July 2026). The same source records lenders seeking equity capitalization of at least 40% of enterprise value, with at least 60% of the aggregate equity account required to be new cash.
In project finance, the European PPP Expertise Centre states that senior debt typically covers between 70% and as much as 90% of the total financing requirement in a project-financed public-private partnership, with the remaining 10% to 30% coming from equity shareholders and junior or mezzanine providers (European PPP Expertise Centre, Guide to Public-Private Partnerships, European Investment Bank, 2021). Bain & Company, describing buyouts, puts leverage ratios at 30% to 40% against borrowing costs in the 8% to 9% range in the release accompanying its private equity report of 23 February 2026.
Read the two together and the shape is clear. A corporate buyer commonly funds 40% or more of enterprise value with equity. A project company may fund 10% to 30% of its total financing requirement with equity and junior capital combined. These are not the same denominators and should not be treated as one comparison, but no plausible adjustment closes a gap that wide. Project debt is genuinely higher against the capitalization, and the reason is in the covenant package rather than in the appetite.
“Borrowers arriving from the corporate market ask why a project can carry so much more debt. It is the wrong question. Ask instead how much freedom a corporate borrower is paying for, because that is what the missing leverage bought.”
What do the covenants test, and how differently do they behave?
A corporate package tests leverage and fixed charge coverage against reported earnings, and both inputs move for reasons that have nothing to do with the loan. Earnings fall because a customer left; add-backs are argued; the denominator moves with rates. The result is a test that fluctuates with the business and produces a live population of borrowers sitting close to it. Fixed charge coverage in direct lending stood at 1.3 times in the first quarter of 2026, the third consecutive quarter at that level and up from a trough of 1.1 times in the first quarter of 2024, with the share of borrowers below 1.0 times falling to 19.5% from a peak of 40.9% (Lincoln International, as at 31 March 2026). Covenant defaults ran at 3.1% on that same measure.
Nearly one borrower in five below one times fixed charge coverage is a normal state of affairs in the corporate market, and the market has built an entire apparatus of waivers, amendments and equity infusions around it. That apparatus exists because corporate coverage was never the sizing constraint. It is a warning light bolted onto a loan that was sized on a multiple.
A project package inverts that. The coverage ratio is not a warning light; it is the instrument that sized the loan in the first place, and the debt was built so that the forecast never approaches it. When a project's coverage does deteriorate, the structure responds mechanically and early: distributions lock up, cash is trapped in the project, reserves absorb the shock, and only past all of that does the breach become an event of default. Nobody negotiates a waiver in the first instance because the documents already specify what happens.
Does the difference show up in the outcomes?
Clearly, and over a long enough period to be meaningful. The Global Infrastructure Hub's Infrastructure Monitor 2023, republishing Moody's data on loans originated between 1983 and 2021, records a twenty-year cumulative default rate of 4.5% for infrastructure loans against 8.6% for non-infrastructure loans, average recovery rates of 83.8% against 68.2%, and a twenty-year expected loss of 0.7% against 2.7% (Global Infrastructure Hub, Infrastructure Monitor 2023, published December 2023; data as at 2021).
Roughly half the default rate, materially higher recovery, and about a quarter of the expected loss. That is the return the lender receives for the freedom the borrower surrendered, and it explains the leverage differential better than any argument about asset quality. The same report also records that the origination vintage matters: shifting the cut-off from 2000 to 2010 nearly halves the twenty-year cumulative default rate, from 3.5% to 1.8%, which says the structuring discipline itself has improved rather than that the assets got safer.
One comparison we are not going to make is cost. The corporate series above prices middle-market credit at a point in time, and there is no comparable published project finance margin series to set beside it, because project pricing is negotiated per transaction across asset classes and jurisdictions that do not aggregate. Anyone offering a clean cost-of-debt comparison between these two markets is comparing a published number against an estimate, and the estimate is doing all the work.
| Corporate and non-infrastructure lending | Project and infrastructure lending | |
|---|---|---|
| The sizing metric | A multiple of EBITDA | A coverage ratio against contracted cash flow |
| Published leverage | Total debt 5.00x to 6.50x EBITDA above $25m of EBITDA | Senior debt 70% to 90% of the total financing requirement |
| Equity contribution | At least 40% of enterprise value, at least 60% new cash | Equity plus junior capital, 10% to 30% |
| What the covenant tests | Leverage and fixed charge coverage against reported earnings | Cash available for debt service against scheduled debt service |
| Borrowers below 1.0x fixed charge coverage | 19.5% | Not a comparable measure: coverage sized the loan |
| 20-year cumulative default rate | 8.6% | 4.5% |
| Average recovery rate | 68.2% | 83.8% |
| 20-year expected loss | 2.7% | 0.7% |
What should a borrower moving between the two actually do differently?
Change what it prepares. A corporate financing is won with an earnings story: quality of earnings, add-backs defended, a management team that can carry a growth plan. A project financing is won with a contract file and a model: the offtake or concession, the construction contract, the operating agreement, the insurance package, and a driver-based model whose downside case the lender will replace with its own. Preparing the first when the second is required loses months, and preparation is where projects lose time they never recover.
Change what it negotiates. In the corporate market the visible negotiation is leverage and spread. In project finance the negotiation that decides the size of the facility is the coverage target, the composition of the lender's downside case, and the definition of cash flow available for debt service. Those definitions move the outcome more cheaply than the threshold does, and sponsors who spend their leverage on the spread arrive at the coverage discussion with nothing left.
And change what it expects afterward. A corporate borrower keeps its cash and reports quarterly. A project company distributes when the test permits and the reserves are full, and not otherwise, for the life of the loan. That constraint is not a term to be traded away later; it is the thing the extra leverage was exchanged for. A borrower unwilling to live inside it should be financing on its balance sheet, and should reach that conclusion before the advisers are appointed rather than after.
As of September 2026
Sources: corporate senior and total leverage bands by EBITDA size and the minimum equity capitalization and new cash requirements are from SPP Capital Partners, Market At A Glance, July 2026. Fixed charge coverage, the trough comparison, the share of borrowers below 1.0 times and the covenant default rate are from Lincoln International, as at 31 March 2026. Buyout leverage ratios and borrowing costs are from Bain & Company, in the release accompanying its private equity report of 23 February 2026. Senior debt and equity shares of a project-financed public-private partnership are from the European PPP Expertise Centre, Guide to Public-Private Partnerships, European Investment Bank, 2021. Twenty-year cumulative default rates, average recovery rates, expected loss and the origination-vintage comparison are from the Global Infrastructure Hub, Infrastructure Monitor 2023, published December 2023, which republishes Moody's project finance and non-infrastructure bank loan data as at 2021 for loans originated from 1983. No cost-of-debt or margin comparison between the two markets is quoted, because no comparable published project finance pricing series exists. Nothing here describes a transaction or engagement.
This position sits within our project finance practice.