Revolver/ Capex Facility counting to debt

Hi all,
Seen multiple ways of doing this, therefore my question:

  • Would you guys count the revolver into the sources and uses?
  • Financing fees: is the revolver counting towards "total debt", therefore increasing the finance fee as part of uses?
  • at the end of the lbo, is revolver counting to debt, therefore to net debt?

Comments (8)

Oct 22, 2019

I would use the revolver in S&U.
Revolver does count towards total debt and is used in the debt-service-coverage-ratio, which is a critical lending covenant.
I think it always counts as debt since it is collateralized by the most liquid and valuable inventory.

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Oct 25, 2019

I don't think this reply is 100% accurate

Normally revolver wouldn't appear in sources unless it is drawn upon when the company gets acquired which doesn't make sense because revolvers exist to provide liquidity in events you can't make mandatory debt repayments or interest payments from your operating cash flow less investments

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Oct 25, 2019

Agreed except we happen to only use ABL revolvers and usually have them about 2/3 maxed out (on available capacity) when we do acquire a business. We're niche and non-traditional so you're probably more correct on this in general.

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Oct 22, 2019

Thank you - i assume same goes for the capex facility if there is one in addition to the revolver?

Array

Oct 22, 2019

Strange that there is a facility specifically for capex? I've seen facilities used to maintain a minimum cash balance for the purposes of assuming normal occupation though. But yes, revolver is considered debt and should be treated as such everywhere in the financial statements.

Oct 25, 2019

It is common practice to ask for revolving capex credit line

Mar 23, 2020

then how do we treat capex revolver in debt schedule? could you plz elaborate on it a bit? I have a case study where capex is financed with capex debt, a 400mn revolving line facility but i don't know whether i should include this in source and use and neither do i know how to treat it in debt schedule cos normally revolver is drawn when excess cash is not enough for repayment. a million thanks in advance.

  • VP in PE - LBOs
Mar 23, 2020
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