Swing Line Agreement

 10 October 2021      

A revolving credit is used where the financing needs of the company are more variable. For example, if a business grows during this period and needs working capital and it is expected that the growth period will exceed one year, a long-term loan would be inappropriate, given that daily capital needs vary. One of the variants of the revolving loan is the revolving standby credit facility, which refers to a certain type of Swingline facility. A Swingline facility is generally considered to be a custodial credit facility available for subscription on the same day at short maturity, usually no more than seven or ten days. A Swingline credit can allow the borrower to have access to a large amount of cash. Swingline loans can be intercepted or used the same day a request is made to the lender and are spent for smaller amounts than the existing credit facility. As with any credit facility, there are pros and cons for every credit product. Business leaders need to evaluate the pros and cons in order to determine if a Swingline loan is a viable option. The solution to this problem is a swing line. Instead of asking the 16 banks in the consortium to advance money, the company can go to a bank called the lender Swing Line (usually the administrative agent).

The Swing Line lender can pay the full advance up to a 10-20% limit of the total investment (for ACCO, the Swing Line limit is $30 million). While the lender Swing Line makes the credit, the risk is really borne by the entire credit group. The credit agreement allows the lender Swingline to force the entire banking group to refinance the Swingline loan at any time (i.e. to force each bank to advance its proportionate share). Carlton is a perfect example. In November 2011, ACCO Brands, a leading manufacturer of office products, and MeadWestvaco Corporation, a leading packaging manufacturer, agreed to merge MeadWestvaco`s consumer & office Products business into ACCO Brands in a transaction valued at approximately $860 million. But what if the loan is not $100 million for 6 months and is instead $10 million for 6 days? The solution to this problem was a swing line….