Revolving Credit Facility

A revolving credit facility (RCF) is a flexible financing line made available to the borrower within an acquisition or corporate financing, which can be drawn, repaid and redrawn freely within the authorised limit — hence "revolving". Unlike amortising senior debt, the RCF serves as the operational liquidity reserve of the financing structure.

In an LBO, the RCF primarily funds seasonal working capital needs, cash flow timing gaps, and small opportunistic investments. It is typically undrawn at closing — its existence signals financing structure robustness — but can be drawn within days when needed. Its size typically represents 10 to 15% of total senior debt, or CHF 2 to 5 million for a mid-market transaction.

The RCF cost has two components: an interest rate on drawn amounts (typically SARON + 2.0–2.5%) and a commitment fee on undrawn amounts, typically 35–40% of the interest rate. This structure incentivises the borrower to draw only what is strictly needed. It is secured by the same collateral as senior debt and benefits from the same repayment priority.

Example: in an CHF 18.0 million EV LBO, the structure includes CHF 9.0 million amortising senior debt + CHF 2.0 million RCF (undrawn at closing). Six months post-closing, strong seasonality generates a working capital peak of CHF 1.2 million — the RCF is drawn, then repaid 90 days later. Actual cost: CHF 1.2M × (SARON + 2.2%) × 90/365 = CHF 8,100.

At Hectelion, we size and negotiate revolving credit facilities in our financial structuring mandates to ensure post-closing operational flexibility.