Headroom

1. Borrowing facilities.

The undrawn amount of a borrowing facility at any time is known as the headroom under that facility. Note that headroom is a term that can have more than one meaning and - here as elsewhere - it is important to be clear about the definition in its particular context.

(i) Often when treasurers talk about headroom, they mean the total amount of undrawn committed facilities.

(ii) Sometimes they include uncommitted facilities as well.

(iii) They take different views on whether or not they add cash balances to their headroom figure.

2. Equity.

An amount of authorised but unissued equity shares.

3. Borrowings documentation.

The difference between the current level of a financial covenant measure and the level at which the covenant would be breached.

4. Trading limits.

The difference between the current level of a trading position and the trading limit.

5. More generally, any measure of financial or operational flexibility, or safety margin.