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CFA Level I · CFA Level I Exam · Fixed-Income Markets for Corporate Issuers

Relative to a bilateral bank loan, a revolving credit facility extended to a corporate borrower most likely:

A revolving credit facility most likely lets the borrower draw, repay and redraw funds up to a committed limit. It works like a corporate credit line, with a commitment fee usually charged on the undrawn portion, rather than a fully drawn, non-prepayable loan.

  1. Arequires the full amount to be drawn on the first day
  2. Ballows the borrower to draw, repay and redraw up to a limitCorrect
  3. Cprohibits repayment before the final maturity date

Explanation

A revolving credit facility lets the borrower draw, repay and redraw up to a committed limit during the commitment period, and lenders typically charge a commitment fee on the undrawn portion. It does not require full drawdown at the start, and prepayment is generally allowed.

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