The response to last week’s column, as we initiated our special series on the state of credit standards in the leveraged lending market, was heartening. Readers enthusiastically supported the notion that industry players need to be reminded of the basics of credit risk and why it’s critical to stick to the fundamental tenets of sound underwriting practices.

One reader reiterated the call for more scrutiny of today’s components of cash flow. “You articulated for all of us,” he wrote, “the importance of the concept of ‘quality Ebitda.’” Another related several deals she had seen recently where the definition of Ebitda was almost comically distorted. “One model showed cash flow adjusted for future revenues from a new customer.” She laughed. “You can’t repay debt with phantom Ebitda!”

The absence of contractual amortization was another hot topic. “The problem is that senior lenders long ago gave up the ghost on getting repaid,” one veteran credit pro wrote in a note. “They forgo real amortization and deceive themselves by thinking ratio de-leveraging is the same as actually paying down debt.”

The concept of “net debt” got a healthy going over from several sources. “Why do lenders still allow accumulated cash to be counted against debt for covenants?” a risk manager asked rhetorically. “When cash flow evaporates, what do you think happens to all that cash?”