Revolving credit facilities are borrowing facilities that are provided by banks to their corporate customers. They allow companies to borrow up to a predefined limit or cap and then repay and borrow again within the term of the facility. In this example, the borrower has increased borrowings under their RCF to a hundred in April repaid 80 of that over July and August and then drawn down or borrowed another 10 in September. These facilities are typically used by companies to finance short term often operational borrowing needs. They can also be referred to as revolvers or RCFs. The term of an RCF can typically range anywhere from 364 days to five years and the need to renew the facility at the end of the term presents what is known as rollover risk. Since the company may see an increase in their borrowing costs if their credit quality is deteriorated or if banks are less willing to offer this service. Investment grade borrowers tend to finance their short term operational working capital requirements with commercial paper programs. As a result, these investment grade borrowers don't really need an RCF to finance their working capital needs but instead use RCFs as a backstop to their commercial paper programs. Essentially as a form of insurance. If they're struggling to make a repayment they can dip into their RCF. The terms for investment grade borrowers is often 364 days since if banks provide a facility for under a year they're not required to make the same regulatory provisions. The lower cost for the bank is passed onto the investment grade borrower in the form of lower rates. For high yield borrowers, they typically don't have access to commercial paper programs, so they rely on their RCF to finance their operating working capital needs. This makes them tend towards longer term RCFs often for several years to reduce rollover risk. However, since banks are required to set aside regulatory capital for providing credit facilities this will result in higher fees. Providers of RCFs will charge interest on any money drawn down under the RCF, but will also charge other fees including a commitment fee, which is payable only on the undrawn amount. This payment is required since there is a regulatory cost to the bank of providing the facility, even though the money may not be borrowed. A facility fee which is an annual admin fee, and also potentially a security trustee fee, which applies only to a syndicated facility where a number of banks are involved in providing the funds and is payable to the senior lender within the syndicate who holds security on behalf of the entire syndicate. The borrower may be hit with other front end fees on signing up to the facility, such as a range of fees and underwriting fees. In this example of a collateralized RCF, the borrower has been provided with an RCF with a limit of 170 but this must be backed up with collateral. In this instance, the collateral is calculated, it's 80% of their accounts receivable balance under 90 days old. This company therefore only has eligible capital of 160 capping the amount they can borrow under the RCF at 160. Let's assume the company has now borrowed a hundred from this total, leaving 60 as the undrawn amount. If the interest rate is 3% this will be payable on the a hundred borrowed giving an interest expense of three. The commitment fee is based on the undrawn down amount or the reserve position of 60 and with a commitment fee rate of say 1% the amount of a commitment fee will be 0.6 with an additional facility fee of 0.5, the total fees payable by the borrower will be 4.1.