medium · Private Equity & LBOs

In a 'Cash Sweep' mechanic, why is the 'Minimum Cash' balance subtracted from the available cash before determining the final sweep amount?

1. To ensure the GP can receive its catch-up distribution before debt is repaid.
2. Because Minimum Cash is considered a 'Debt-like item' in the Enterprise Value bridge.
3. To satisfy the requirements of the Inter-Creditor Agreement regarding senior debt seniority.
4. To provide the portfolio company with an operational liquidity cushion for day-to-day working capital needs.

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