A company has a €500M bond maturing in 2 years and a €300M RCF undrawn. The CFO wants to refinance now to lock in low rates. You notice the RCF has a material adverse change (MAC) clause. How does this affect your refinancing strategy?
An advanced Corporate Treasury question — expect it in final rounds and case-heavy interviews (IB, PE, Big-4 Transaction Services).
THE SHORT ANSWER
The MAC clause means the RCF could be revoked if the company's condition materially worsens. Relying on it as a bridge to a new bond is risky. I would recommend launching the bond refinancing early, while the RCF is still available as a backstop. If the bond issuance fails, we could draw the RCF before any MAC event, but that would be costly and signal distress. Better to issue the bond now, lock in low rates, and keep the RCF undrawn for true emergencies. The MAC clause increases the urgency to refinance via the bond market.
WHAT INTERVIEWERS LISTEN FOR
- ✓Highlights risk of MAC clause on RCF availability
- ✓Recommends early bond issuance
- ✓Suggests using RCF as backstop, not primary funding
COMMON MISTAKES
- ✗Ignores MAC clause
- ✗Assumes RCF is always available
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