Credit Tranche

AAA

DEFINITION of 'Credit Tranche'

A system used by the International Monetary Fund (IMF) to govern its lending activities to member countries. When a member nation applies for a loan to help with balance of payment difficulties, the IMF will disperse the loan in a series of credit tranches. Tranches are a portion of the loan that is released upon the member country fulfilling conditions or requirements set forth by the IMF.

BREAKING DOWN 'Credit Tranche'

An International Monetary Fund loan usually lasts between 18 months and three years. At the start of the loan, the borrowing nation must demonstrate that reasonable efforts have been taken to overcome its financial difficulties. If this requirement is met, the country will receive the first credit tranche of the loan, usually 25% of its total value. The later series of credit tranches will have various conditions, each of which the borrower must satisfy before receiving the next portion of funding.

RELATED TERMS
  1. International Monetary Fund - IMF

    An international organization created for the purpose of standardizing ...
  2. Balance Of Payments (BOP)

    A record of all transactions made between one particular country ...
  3. Unitranche Debt

    A type of debt that combines senior and subordinated debt into ...
  4. Balance Of Trade - BOT

    The difference between a country's imports and its exports. Balance ...
  5. Fiscal Deficit

    When a government's total expenditures exceed the revenue that ...
  6. Debtor Nation

    A nation with a cumulative balance of payments deficit. A debtor ...
Related Articles
  1. Bonds & Fixed Income

    Understanding Capital And Financial Accounts In The Balance Of Payments

    The current, capital and financial accounts compose a nation's balance of payments.
  2. Insurance

    What Is The World Bank?

    You've heard of the World Bank, now find out how it functions and why some groups oppose it.
  3. Fundamental Analysis

    An Introduction To The International Monetary Fund (IMF)

    Chances are you've heard of the IMF. But what does it do, and why is it so controversial?
  4. Personal Finance

    What Is The Bank For International Settlements?

    Get the scoop on the structure and functions of the oldest global financial institution.
  5. Fundamental Analysis

    Calculating Return on Net Assets

    Return on net assets measures a company’s financial performance.
  6. Professionals

    Are Hedge Fund ETFs Suitable for Your Portfolio?

    Are hedge fund ETFs right for you? Here's what investors need to consider.
  7. Mutual Funds & ETFs

    Currency-Hedged ETFs: Should You Invest?

    Currency-hedged ETFs offer many more pros than cons when compared to their counterparts, but there is still one big con.
  8. Professionals

    State Street Shifts to Hedge Funds

    ETF pioneer State Street has been losing market share to its peers. Here's how it plans to turn that around.
  9. Bonds & Fixed Income

    Brave Enough to Invest in Greek Bonds? Here's How

    Learn how an individual investor can invest in Greek government bonds, along with an overview of the substantial risks and potential profit.
  10. Investing

    Picking Apart a Winning New Bond Fund Alternative

    Schooner's Hedged Alternative Income Fund offers a unique strategy, but does its upside potential outweigh its downside risk right now?
RELATED FAQS
  1. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
  2. Where can I buy penny stocks?

    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
  3. How are American Depository Receipts (ADRs) priced?

    The price of an American depositary receipt (ADR) is determined by the bank or other financial institution that issues it. ... Read Full Answer >>
  4. How are American Depository Receipts (ADRs) exchanged?

    American depositary receipts (ADRs) are bought and sold on regular U.S. stock exchanges, either in the over-the-counter market ... Read Full Answer >>
  5. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
  6. What are the top high yield bond ETFs?

    Three of the most popular high-yield bond exchange-traded funds, or ETFs, are the Peritus High Yield ETF (HYLD), the SPDR ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  2. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  3. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  4. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  5. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  6. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!