Pro-Rata Tranche

AAA

DEFINITION of 'Pro-Rata Tranche'

A portion of a syndicated loan that is made up of a revolving credit facility and an amortizing term loan. The pro-rata tranche is syndicated by banks, as opposed to institutional tranches, which are primarily comprised of non-bank lending institutions. Both tranches may often be found within the same syndicated loan.

Pro-rata tranches are common within the leverage loan market, or in loans to companies with existing high debt loads.


INVESTOPEDIA EXPLAINS 'Pro-Rata Tranche'

Within the pro-rata tranche, the revolving credit line will typically have the same ending or maturity date as the term loan. By forming a syndicate, banks involved in the deal can spread the credit risks among several lenders. Pro-rata tranches have historically been much larger than institutional tranches in terms of dollar size.


RELATED TERMS
  1. Credit Facility

    A type of loan made in a business or corporate finance context. ...
  2. Pro-Rata

    Used to describe a proportionate allocation. A method of assigning ...
  3. Term Loan

    A loan from a bank for a specific amount that has a specified ...
  4. Tranches

    A piece, portion or slice of a deal or structured financing. ...
  5. Revolving Credit

    A line of credit where the customer pays a commitment fee and ...
  6. Syndicated Loan

    A loan offered by a group of lenders (called a syndicate) who ...
RELATED FAQS
  1. Why do companies issue debt and bonds? Can't they just borrow from the bank?

    Companies issue bonds to finance operations. Most companies can borrow from banks, but view direct borrowing from a bank ... Read Full Answer >>
  2. What is the theory of asymmetric information in economics?

    The theory of asymmetric information was developed in the 1970s and 1980s as a plausible explanation for common phenomena ... Read Full Answer >>
  3. How does market risk differ from specific risk?

    Market risk and specific risk are two different forms of risk that affect assets. All investment assets can be separated ... Read Full Answer >>
  4. How is perpetuity used in the Dividend Discount Model?

    The basic dividend discount model (DDM) creates an estimate of the constant growth rate, in perpetuity, expected for dividends ... Read Full Answer >>
  5. How valid is the notion of economies of scope?

    The concept of economies of scope is widely accepted in both managerial and theoretical economics. It proposes that it is ... Read Full Answer >>
  6. What are the primary differences between a closed end investment and an open end ...

    The primary differences between closed-end funds and open-end funds lie in how they are structured and how they are bought ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    The Bond Market: A Look Back

    Find out how fixed-income investments evolved in the past century and what it means today.
  2. Bonds & Fixed Income

    Asset Allocation In A Bond Portfolio

    An investor's fixed-income portfolio can easily beat the average bond fund. Learn how and why!
  3. Economics

    What Is Supply?

    Supply is the amount of goods a producer is willing to produce at a given price, and is one of the most basic concepts in economics.
  4. Economics

    Modified Internal Rate of Return (MIRR)

    Modified internal rate of return (MIRR) is a variant of the more traditional internal rate of return calculation.
  5. Forex

    10 Cities Leading Bitcoin Adoption

    An overview of the global cities leading the way in using the virtual currency Bitcoin.
  6. Forex

    Beware of these Five Bitcoin Scams

    We look at five bitcoin scams and how to protect yourself from fraud.
  7. Investing

    Bitcoin Vs. Litecoin: What's The Difference?

    Litecoin is often referred to as "the silver to Bitcoin's gold." But what is Litecoin, and how does it compare to its more famous counterpart?
  8. Forex Education

    Why Governments Are Afraid Of Bitcoin

    Bitcoin is the first decentralized peer-to-peer payment network and cryptocurrency. Governments may fear Bitcoin because its value is determined by users and not central governments or banks. ...
  9. Economics

    Understanding the Fisher Effect

    The Fisher effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate.
  10. Fundamental Analysis

    Explaining the Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio.

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center