If surplus cash exceeds the revolver balance, what happens?

If surplus cash exceeds the revolver balance, what happens?

• A. revolver repaid and ending balance zero
• B. equity issued
• C. revolver increased
• D. no change

Answer: (A)

When there is more cash than the amount outstanding on the revolving credit facility, the excess cash is used to sweep and repay the revolver. If the surplus cash covers the entire revolver balance, the facility is fully repaid and the ending revolver balance becomes zero. Any remaining cash after paying down the revolver would be applied elsewhere (such as reducing term debt or staying as cash) depending on the model, but the revolver itself ends at zero. Equity issuance would not be triggered by having extra cash, the revolver wouldn’t increase with available cash, and there would be a change in the revolver balance once the excess cash is applied.

When there is more cash than the amount outstanding on the revolving credit facility, the excess cash is used to sweep and repay the revolver. If the surplus cash covers the entire revolver balance, the facility is fully repaid and the ending revolver balance becomes zero. Any remaining cash after paying down the revolver would be applied elsewhere (such as reducing term debt or staying as cash) depending on the model, but the revolver itself ends at zero. Equity issuance would not be triggered by having extra cash, the revolver wouldn’t increase with available cash, and there would be a change in the revolver balance once the excess cash is applied.