American Strategic Investment Co. — financial distress indicators

Interest coverage (EBIT / interest) is -0.44×.

When EBIT < interest, debt service is funded from cash reserves or new borrowing — the classic precursor to payment default and covenant breach.

At the current free-cash-flow burn, cash covers ~5 months.

Going-concern standard: management must assess ability to continue for 12 months (ASC 205-40). Runway below that horizon forces dilution, asset sales or default.

Merton distance-to-default -1.49 σ → PD 93%.

Structural (Merton/KMV) model: equity is a call option on assets; low distance-to-default means assets are close to the default point.

Net income negative in 3 of 3 fiscal years.

Persistent losses erode equity and the capacity to absorb shocks.

Total debt is 18.3× EBITDA.

Debt above ~6× EBITDA is deep sub-investment-grade territory; refinancing becomes difficult when rates or earnings move against the company.

Operating cash flow negative in 3 of the last 3 years.

A business that cannot fund itself from operations depends on external capital to survive.

O-score 1.93 → model probability 87%.

Ohlson (1980) logit model of 1-year corporate failure; O > 0 (p > 50%) is the original failure cut-off.

Revenue changed -30% year over year.

Falling sales reduce cash available for debt service.

Revenue declined every year for three years.

Structural, not cyclical, decline.

1 severe and 0 moderate distress-related headlines in the last 6 months.

Headlines are corroborating evidence only; they are weighted lightly and never drive a flag alone.