Cash Sweep

Private Equity Glossary

Mandatory prepayment mechanism in a credit agreement requiring a specified percentage of excess cash flow (ECF) to be applied to debt repayment, before any sponsor distribution or growth investment. Typical structure: 50-75% ECF sweep stepping down with leverage ratio improvements (e.g., 75% if leverage >5.0x, 50% if 4.0-5.0x, 25% if <4.0x, 0% if <3.0x). Accelerates de-leveraging and reduces refinancing risk but consumes the cash that would otherwise fund dividend recaps or growth capex; modern sponsor-friendly credit agreements minimize sweep mechanics.

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