In an LBO every spare dollar repays debt, in a set order. Each year:
- Start from opening cash plus the year's free cash flow, less the mandatory amortization, less the minimum cash the business must keep.
- If that's negative, draw the revolver. If positive, repay the revolver first: it's the most expensive and most flexible debt, and lenders expect it cleared before anything else.
=-MIN(cash available, opening revolver) does both.
- What is left goes to the sweep: optional repayment of the term loan, but never more than it still owes after the mandatory payment.
Cash then ends the year at exactly the minimum while any debt is outstanding. A common mistake is to sweep the term loan while the revolver is still drawn, or to sweep from cash that the minimum balance needs.