Unsecured Commercial Revolving Credit: Debt-to-EBITDA Covenants, Clean-Up Periods & Commitment Fees
A commercial treasury review of unsecured bank revolving facilities, 30-day clean-up requirements, leverage covenants, and unused commitment fees.
Revolver Covenant Compliance Tool
Monitor leverage ratio limits, interest coverage thresholds, and clean-up calendars
Empirical Analysis & Findings
## Corporate Revolving Credit Lines and Covenant Architecture
Unsecured revolving credit facilities provide prime-rate liquidity for corporate working capital needs without encumbering enterprise real estate or fixed equipment.
### 1. Primary Financial Maintenance Covenants
Commercial banks monitor credit health through quarterly financial covenant compliance certificates:
1. **Maximum Senior Leverage Ratio**:
$$\frac{\text{Total Senior Funded Debt}}{\text{Trailing 12-Month Adjusted EBITDA}} \le 3.00x$$
2. **Minimum Fixed Charge Coverage Ratio (FCCR)**:
$$\frac{\text{EBITDA} - \text{Capex} - \text{Cash Taxes}}{\text{Debt Service} + \text{Cash Interest}} \ge 1.25x$$
3. **Minimum Tangible Net Worth (TNW)**:
$$\text{Total Equity} - \text{Goodwill} - \text{Intangibles} \ge \text{Base Hurdle}$$
Linked Entities in the Autonomous Knowledge Graph
Frequently Asked Questions
What is a mandatory 30-day clean-up requirement on an unsecured credit line?
Lenders mandate that the borrower maintain a zero outstanding principal balance for 30 consecutive days each year to prove the facility funds seasonal working capital rather than permanent debt.
What is an unused commitment fee on an unsecured line of credit?
Banks charge an annual fee of 25 to 50 basis points on the undrawn portion of the credit facility to compensate for regulatory capital allocation requirements.
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