Module IV· Cash SweepIntermediate
Question
How do you treat the revolving credit facility (RCF) in the cash sweep?
Answer
Mechanics
The RCF is a flexible line — it can be drawn and repaid depending on cash needs. Treated in the sweep as follows:
Deep diveShow more details
Comparison (RCF vs term loan)
| Aspect | RCF | Term Loan |
|---|---|---|
| Repayment schedule | flexible | fixed |
| Commitment fee | yes (typically 50% of the spread on the undrawn portion) | no |
| Treatment in the sweep | repaid on excess cash, redrawn when needed | one-way repayment |
| Modeling | dynamic (cash-floor-driven) | hardcoded schedule + sweep |
Consequence in the model
- Year-End: on excess cash → repay the RCF first (no make-whole, low cost)
- Year-Begin next year: if cash is below the min-cash floor → draw the RCF again
- Net effect: the RCF balances seasonality automatically
Common pitfalls
- On excess cash the RCF IS repaid first, NOT senior term debt — TLA/TLB sit lower in the waterfall
- The commitment fee on the undrawn portion is often forgotten (typically 0.5% on the undrawn balance)
Pitch tip
Question: "When do you draw the RCF in the forecast?"
Answer: "Seasonal working-capital peaks (typically Q1-Q2 in the middle market), or for one-off cash needs like bolt-on acquisitions below the sweep threshold"