Cliffs Natural Resources (NYSE:CLF) is currently stuck between a rock and a hard place. On one hand, the company is under assault by activist fund Casablanca Capital, which wants to split the company up. On the other hand, Cliffs is struggling with the falling price of iron ore.

But there is a more pressing issue Cliffs might have to deal with in the near future: debt.

Plenty of risk
According to analysts at RBC Capital Markets, Cliffs' debt covenants state the company must maintain a debt to earnings before interest tax amortization and depreciation ratio -- or debt to EBITDA ratio -- of at least 3.5x. Additionally, the company's EBITDA to interest ratio must be 2.5x trailing over four quarters.

It is believed that at the end of the first quarter, Cliffs' debt to EBITDA ratio came in at 2.5x, and EBITDA to interest was 7.5x. RBC analysts expect the company to end the year with a trailing 12-month debt to EBITDA ratio of 3.1x, which in itself, is not a terrible ratio.

But iron ore prices are not moving in Cliffs' favor, and the figures above are based on the fact that the price of iron ore averages $114.30/tonne for the rest of the year. This is unlikely to happen. The price of iron ore is currently below $100 per tonne, and Goldman believes that this could fall as low as $80 as more supply hits the market throughout the rest of the year.

With this being the case, analysts at RBC believe that a breach its debt covenants is possible. .

Under scrutiny
This is not the first time Cliffs' debt covenants have come under scrutiny this year. Analysts at Axiom Capital picked up on the fact that Cliffs was using a base price assumption of $120 per ton for iron ore during 2014. It was quickly discovered that if Cliffs assumed a price of anything less than $120 per tonne, it would be in breach of debt covenants:

[W]e now know why the company is projecting iron ore prices, on avg., of ~$120/ton in 2014 ... because at $119.99/ton, [Cliffs Natural Resources] will be in violation of its most restrictive financial covenant (i.e., the one that says debt cannot exceed 3.5x EBITDA).

Still, Cliffs' recently announced cut in capital spending by 25% to $100 million per annum, is a good thing.

Lowering forecasts
With the price of iron ore collapsing, Cliffs' earnings forecasts have been revised downward across the board. Analysts have forecast that Cliffs' recurring EBITDA for 2014, factoring in the low price of iron ore, will now be in the region of $500 million, nearly half of what the Street previously expected, which was $880 million to $890 million for fiscal 2014.

Not the only one
But Cliffs is not the only company to have suffered the wrath of analysts' downgrades recently. BHP Billiton (NYSE:BHP), the world's largest diversified miner, has come under pressure recently as the price of iron ore falls.

In particular, BHP has had its EPS forecasts for 2015 downgraded almost every month by analysts since mid-June last year. During June last year, Wall Street expected that the company would earn $3.35 per share for fiscal 2015. But now, after a slew of downgrades, the Street expects the company to report earnings of $2.70 for 2015.

That being said, BHP's debt to EBITDA ratio is expected to come in at 0.8x for fiscal 2014, falling to 0.7x for fiscal 2015. So, BHP has plenty of room before it runs out of financial space.

Foolish summary
It would seem as if Cliffs is heading into trouble with its creditors. As the price of iron ore falls, Cliffs' revenue is sliding, and this is putting pressure on the company's banking facilities.

If Cliffs breaches its banking covenants, the company is likely to face ratings downgrades -- and unless Casablanca bails out the company, it could be game over.

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Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.