TH International Limited — financial distress indicators

Total liabilities are 2.25× total assets.

Balance-sheet insolvency test: debts exceeding the fair value of assets is the statutory definition of 'insolvent' in 11 U.S.C. §101(32).

Interest coverage (EBIT / interest) is -14.39×.

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

Merton distance-to-default -2.22 σ → PD 99%.

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

Current ratio is 0.28 (current assets cover 28% of near-term obligations).

Cash-flow insolvency test: inability to pay debts as they fall due is the trigger for both U.S. involuntary petitions and Indian IBC default.

Net income negative in 3 of 3 fiscal years.

Persistent losses erode equity and the capacity to absorb shocks.

Debt is 184% of assets while EBITDA is not positive.

With no operating earnings, repayment depends entirely on asset sales or fresh capital.

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 10.99 → model probability 100%.

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

Cash covers ~13 months of free-cash-flow burn.

Funding needs within two years make the company dependent on capital-market access.

Short-term debt is 7.2× cash on hand.

Maturity wall: debt due within a year must be refinanced, which is the most common proximate cause of filings.