hard · Private Credit loan-structures-instruments
An asset-based revolver advances against a borrowing base of eligible accounts receivable at an 85.0% advance rate, subject to a 25.0% concentration limit (no single obligor may exceed 25.0% of gross eligible AR before advance). Gross eligible AR is $100.0 million, but one customer owes $40.0 million. The borrower currently has $70.0 million drawn.
What is the impact on availability of applying the concentration cap, and is there a borrowing-base deficiency?
- Availability is $72.25 million with no deficiency, because the cap is applied to the post-advance dollar amount rather than to gross eligible AR
- Availability is $72.25 million with a $2.25 million surplus, because the $15.0 million excess concentration is removed before applying the 85.0% advance rate
- Availability is $85.0 million with no deficiency, because concentration limits cap exposure but do not reduce the borrowing base itself
- Availability is $63.75 million with a $6.25 million deficiency, because the full $40.0 million obligor balance is deemed ineligible once the cap is breached
Sign up free to see the explanation and track your rank →
More Private Credit loan-structures-instruments practice
- What is the blended interest rate paid by the borrower?
- What is the blended interest rate margin the borrower pays on the total facility?
- A private credit fund is evaluating a 'Unitranche' loan for… — What is the borrower's expe
- A fund manager is valuing a senior loan to a private mid-mar… — Under ASC 820, how is this
- Which group is the fulcrum?
- What is the indicative margin for the 'last-out' lender?
- What is the primary risk factor the lender evaluates?
- If the company fails and liquidates for $2M after two years, what was the primary risk rea