easy · Debt Capital Markets

What happens to the interest expense of a company when it draws a portion of its Revolving Credit Facility?

1. Interest expense decreases because the commitment fee is no longer applicable.
2. Interest expense increases based on the drawn amount multiplied by the applicable floating rate.
3. The interest rate is fixed at the time of the draw and remains constant for life.
4. The drawn amount is considered equity and does not incur interest expense.

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