Calculation

The Borrow Capacity Model calculates the percentage change in Shock Factor points due to an increase in unsecured debt. As Debt increases on the Balance Sheet, the effects flow through to the Shock Factors.

SF Percentage Change = (Post Debt Shock Factors Score - Original Shock Factors Score) / Original Shock Factor Score

The percentage change between Shock Factor scores is calculated and checked against the Adjusted Tolerance Percentage. The optimal amount of Additional Borrow Capacity is calculated by solving for the increased unsecured Debt required to achieve the Adjusted Tolerance Percentage.

The outputs are Additional Borrow Capacity, which can be interpreted as the amount of additional Debt that caused the percentage change in Shock Factors to equal the Adjusted Tolerance Percentage, and Borrow Capacity, calculated as the existing Debt plus Additional Borrow Capacity.