Cash Sweep
Investment Banking Glossary
Provision in an LBO credit agreement requiring the borrower to apply a defined percentage of excess cash flow to mandatory debt prepayment. Sits at the bottom of the LBO cash flow waterfall: interest rightarrow mandatory amortization rightarrow capex rightarrow NWC rightarrow taxes rightarrow minimum cash reserve rightarrow optional prepayment (the sweep). Sweep percentages typically step down as leverage declines (e.g., 75% sweep above 5.0× Total Debt/EBITDA, 50% between 4.0-5.0×, 0% below 4.0×).
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