Glossary

Cash Sweep

By September 14, 2021No Comments

A mechanism used in project finance debt structures where projected revenue / cashflow is inherently unpredictable. Following scheduled Debt Service and any required transfers to reserve accounts, some or all of the remaining Cashflow Available for Debt Service – which would usually be distributed to the sponsors of the project – is applied to prepay the loan facility. The prepayment is typically applied first to the last scheduled instalment of the loan, then the next-to-last and so on until the cash sweep proceeds have been used up. This is done in order to shorten the life of the loan facility when cashflow is seen as inherently unpredictable.