Debt Schedule

A debt schedule is organized by debt tranche, typically listed in order of seniority: revolving credit facility (revolver), Term Loan A, Term Loan B, senior notes, subordinated notes, and mezzanine debt. For each tranche, the schedule tracks: beginning balance, mandatory amortization (contractually required repayments), optional prepayments (excess cash used to pay down debt early), new borrowings or drawdowns, and ending balance. Interest expense is calculated for each tranche based on its respective rate, and total interest flows into the income statement. The schedule must balance with the sources and uses at entry and connect cleanly to the balance sheet.

Mandatory amortization is the contractually required repayment schedule — for example, a Term Loan A might require 5-10% annual principal repayment. Optional prepayments are made when the company generates excess free cash flow beyond what's needed for operations and mandatory debt service. In many leveraged buyout structures, excess cash flow is applied to debt repayment in waterfall order: most senior debt first, then down the capital structure. Understanding the difference between mandatory and optional repayment is critical because it determines the speed of deleveraging and, ultimately, equity returns.

A cash sweep (or excess cash flow sweep) is a provision in debt agreements that requires the borrower to use a specified percentage (typically 50-75%) of excess cash flow to prepay debt. The sweep percentage often steps down as leverage decreases — for example, 75% sweep above 4.0x leverage, 50% between 3.0-4.0x, and 25% below 3.0x. In the model, the cash sweep creates a circular reference: free cash flow determines debt repayment, which determines interest expense, which determines free cash flow. This circularity is typically solved with an iterative calculation or a copy-paste macro. Understanding cash sweeps is essential for modeling debt covenants and deleveraging profiles.

The revolving credit facility acts as a corporate credit card — it's drawn when the company needs liquidity and repaid when cash flow is positive. In the model, the revolver is typically the last piece solved: after all operating cash flows, mandatory debt payments, and capex, if there's a cash shortfall, the revolver is drawn; if there's excess cash, the revolver is repaid first before optional prepayments on term debt. The revolver balance should never exceed its committed size, and it should never go negative. The interest coverage ratio and leverage ratios are checked each period to ensure covenant compliance.