Roll over credit
In international credit transactions, a roll-over loan is a medium to long-term loan , the interest rate of which is not fixed for the entire term of the loan agreement, but is periodically adjusted to the current market conditions. The interest rate adjustment takes place at contractually agreed dates, usually every 1, 3, 6 or 12 months. As a reference rate such as the be LIBOR or EURIBOR used.
General
With a fixed interest rate for a certain period of time, the borrower is to be provided with a more secure calculation basis that relieves him of part of the interest rate risk . If the comparable market interest rates rise during the fixed interest period, the roll-over credit is not affected. However, if the current market interest rates fall, then the borrower has to continue to pay the fixed interest rate ; He therefore only bears the risk of changing interest rates when interest rates fall.
Borrower and Documentation
Medium-sized and large companies , the public sector and states can be considered as borrowers . With these borrowers are of such rate fixation arrangements usually the international treaty standards of LMA basis, after which unused portions of a revolving usable credit line ( English "rollover facility" ) within the availability period ( English "availability period" ) (by the due date English final " maturity date ” ) of the credit line may be used.
Term of the fixed interest rate
The shortest fixed interest period is usually one month. Deadlines of 3, 6 or 12 months are also common. It is usually agreed that after these fixed interest periods have expired, the borrower will be given the option to repay the loan in whole or in part or to agree a new fixed interest period ( English "rollover" ). The roll-over loan thus also has aspects that take into account the liquidity of the borrower. The credit institution's existing lending obligation does not end on the date of a periodic interest rate adjustment, but on the due date of the superordinate loan approval within which revolving claims are possible.
Corresponding loan agreements have a longer term than the fixed interest periods to be agreed within these agreements. If there is a new fixed interest period after a fixed interest period has expired, a periodic interest rate adjustment (again every 1, 3, 6 or 12 months at fixed dates) based on a precisely defined reference rate (e.g. EURIBOR, LIBOR) is contractually agreed. The loan interest is then made up of two components, namely the agreed reference interest rate plus a fixed agreed premium (margin), the amount of which is primarily determined by the creditworthiness of the borrower.
One type of roll-over loan is the Revolving Credit Facility , which is similar to the German overdraft facility .