Bullet Transaction

AAA

DEFINITION of 'Bullet Transaction'

A loan in which all principal is repaid when the loan matures instead of in installments over the life of the loan. Only interest is paid during the loan term. A bullet transaction may have two or more tranches, where the different tranches might have different maturities and/or different interest rates. A company might use a bullet loan for working capital, to purchase equipment or to finance an acquisition, among other uses. Revolving loans and term loans can be structured as bullet transactions. A bullet transaction with a maturity of 15 years would be called a "15-year bullet."

INVESTOPEDIA EXPLAINS 'Bullet Transaction'

A bullet loan can be repaid by refinancing or by earning enough cash to repay the loan. A bullet transaction entails greater risk for the lender because if the company does poorly, the lender may not get back any of the principal. Bullet transactions are priced as a number of basis points (bp) over a benchmark such as U.S. Treasuries. Investors can buy certificates to invest in bullet transactions.

RELATED TERMS
  1. Amortization

    1. The paying off of debt in regular installments over a period ...
  2. Amortization Schedule

    A complete schedule of periodic blended loan payments, showing ...
  3. Refinance

    1. When a business or person revises a payment schedule for repaying ...
  4. Principal

    1. The amount borrowed or the amount still owed on a loan, separate ...
  5. Interest

    1. The charge for the privilege of borrowing money, typically ...
  6. Negative Amortization

    An increase in the principal balance of a loan caused by making ...
RELATED FAQS
  1. Why should you invest in tangible assets?

    Savers who deliberately buy tangible assets for investment purposes value their tangible goods as a form of value diversification ... Read Full Answer >>
  2. How can investors influence the c-suite?

    Investors in publicly traded firms can influence C-suite executives by exercising voting rights or engaging in investor activism. ... Read Full Answer >>
  3. How much of the asset management industry has moved from traditional managers to ...

    While the exact numbers are difficult to calculate due to variations in measurement and the overall growth of the asset management ... Read Full Answer >>
  4. What role did junk bonds play in the financial crisis of 2007-08?

    Junk bonds were the at heart of the financial crisis of 2007-2008. Toxic assets related to the subprime housing market pushed ... Read Full Answer >>
  5. What does a merger or acquisition mean for the target company's employees?

    Suppose one sporting goods manufacturer merges with or acquires another sporting goods manufacturer. Before the merger and ... Read Full Answer >>
  6. What is the best reason to pursue a backward integration?

    Saving money on costs and improving efficiency are two good reasons to pursue backward integration. Backward integration ... Read Full Answer >>
Related Articles
  1. Forex Education

    Countries Where Bitcoin Is Legal & Illegal

    Although bitcoin has been in existence for five years, most countries still do not have consistent laws regulating the cryptocurrency. However, a few countries have banned bitcoin altogether.
  2. Stock Analysis

    Fight Volatility and Inflation with Infrastructure

    As institutional investors flock to infrastructure assets there's good reason for retail investors to follow suit.
  3. Savings

    How to Invest in Liquor (and Avoiding the Hiccups)

    Investing in liquor has been profitable for ages but there could be some hiccups along the way.
  4. Investing Basics

    What is a Foreign Institutional Investor?

    A foreign institutional investor (FII) is a person or a group of people operating or registered in a country that’s not their domicile.
  5. Investing

    Top Alternative Investments To The Stock Market

    Dislike the stock market or want greater diversity? Here are some alternatives.
  6. Fundamental Analysis

    Explaining Enterprise Multiple

    The enterprise multiple is a ratio used to value a company as if it was going to be acquired.
  7. Professionals

    Investors Lack Alternative Investing Knowledge

    A recent survey shows that investors lack knowledge of alternative investments. Here is what advisors can do to combat this.
  8. Chart Advisor

    3 Basic Material Stocks Poised For A Pop

    After large market swings such as the one seen on March 30, 2015, it is not surprising to see traders become more tolerant towards taking on risk.
  9. Investing

    Is It Possible To Trade Bitcoin Options?

    Options trading in bitcoins is a good way to insure or hedge one's risks or earn profits from volatility and speculation, but there still are risks.
  10. Stock Analysis

    Will Kraft-Heinz Be a Winner?

    Kraft and Heinz are now one. This should present a profitable long-term investment opportunity, but isn't likely to be smooth sailing at first.

You May Also Like

Hot Definitions
  1. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  2. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  3. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  4. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  5. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
  6. Marginal Utility

    The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important ...
Trading Center