Which fee is usually applicable to non-investment grade borrowers only?

The commitment fee is typically associated with non-investment grade borrowers. This fee is charged on the unused portion of a credit facility, effectively serving as compensation to the lender for making funds available to the borrower, even if they are not being drawn down immediately. Non-investment grade borrowers often have lower credit ratings and are considered to be higher risk; hence, lenders may impose this fee to mitigate the risk associated with lending to such borrowers.

When a borrower is classified as non-investment grade, the commitment fee can be an important aspect of the lender's compensation structure, ensuring they are being compensated for the potential risk of default. Other fees like facility fees, utilization fees, and upfront fees can apply across various borrower categories, including investment-grade borrowers, but the commitment fee is particularly relevant and commonplace in arrangements involving non-investment grade borrowers.

Thus, the commitment fee is essential for lenders extending credit to borrowers perceived to be more risky, as it aligns the financial compensation with the risk profile associated with lending to those borrowers.