Module 1 · Chapter 3

Facilities and Their Flavours

One loan agreement can hold two very different facilities. This chapter shows how each one behaves, why a firm promise to lend costs a fee, and what the purpose clause is for.

≈ 11 min read 8-question test

In this chapter

  • How a term loan and a revolver differ in practice
  • Why committed money costs a fee and an overdraft does not
  • How lenders, credit and purpose shape a facility

3.1Two facilities in one paragraph

A facility is a lender's promise to lend up to a fixed amount on agreed terms. The Sunrise agreement holds two of them, lent by the same three banks. Facility A is a €35m term loan, which Atlas draws to pay for Solaris and repays in one go after five years. Facility B is a €5m revolver, which Atlas can draw, repay and draw again to pay its everyday bills.

Key point

A term loan is money lent once. A revolver is a limit that Atlas can use again and again. What Atlas really buys with the revolver is the certainty that the money will be there when it needs it.

Also in this chapter

  1. How the term loan works
  2. How the revolver works
  3. Why committed money costs a fee
  4. One bank, a club or an underwritten deal
  5. Investment-grade and leveraged lending
  6. What the purpose clause does
  7. Your job

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