What does it mean if a company has a revolver balance that is negative? Would this mean that the company overpaid down the revolver and is able to borrow paying no interest rate (besides the non-drawn % fee) up until that negative balance number?
For example if the revolver balance is -$500K, could the company could borrow up to 500K and then start to pay interest on any amount above that 500K threshold? Also any reasons why a company may do this and possible interest rate implications would be greatly appreciated.
I've never heard of a negative revolver balance. Can you provide some context?
https://www.macabacus.com/operating-model/revolver-cash-sweep
There is no negative balance revolver in this example.
I overpaid my balance on my credit card once and the "negative" balance behaved like a pre-paid card - I would think this is the same type of situation
I double checked the line item and saw that it was labeled "Borrowings under credit facility; net of deferred financing costs".
I missed the net of deferred financing costs when I first glanced at it so I guess that these deferred financing costs act as a contra-liability? In this case it seems that the deferred costs net out the revolver balance to a negative figure similar the way a company with a ton of cash might have a negative net debt figure.
I'm still a bit confused since I feel like these deferred costs should not have such a drastic affect on the revolver balance. Is anybody familiar with how these deferred costs are usually structured and treated? My first guess would be that they would be similar to an initial 2% fee of the principal the offered loan, but not sure.
Well, typically your financing costs will be amortized over the life of the facility. If they are netting the balance of the financing costs against a revolver with a $0 balance, you might see this (conceptually, at least....but it seems a little weird).
Perhaps the company is prepaying their financing costs? Hard to tell without additional context.....perhaps the company is looking to get out of their revolver....?
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