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 allows the bank to cancel the RCF if a material adverse change occurs. Relying on the RCF as a bridge to a new bond is risky if market conditions worsen. I'd recommend early refinancing via a new bond or term loan, using the RCF as backup only. If we proceed with the RCF, we should negotiate a waiver or ensure the MAC language is limited to the company's specific credit, not broad market events.
WHAT INTERVIEWERS LISTEN FOR
- ✓MAC clause risk
- ✓Early refinancing preferred
- ✓Negotiate waiver or limit MAC
- ✓RCF as backup only
COMMON MISTAKES
- ✗Ignoring MAC risk
- ✗Assuming RCF is always available
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