easy · Debt Capital Markets pricing-yields-curve
What happens to the interest expense of a company when it draws a portion of its Revolving Credit Facility?
- Interest expense decreases because the undrawn commitment fee no longer applies.
- Interest expense increases based on the drawn amount multiplied by the applicable floating rate.
- The interest rate is permanently fixed at the moment of the draw and remains constant for the loan's life.
- The amount drawn is reclassified as equity contribution and therefore does not accrue any interest expense at all.
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