Pro-Rata Tranche

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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. Pro-Rata

    Used to describe a proportionate allocation. A method of assigning ...
  2. Loan Syndication

    The process of involving several different lenders in providing ...
  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. Syndicated Loan

    A loan offered by a group of lenders (called a syndicate) who ...
  6. Revolving Credit

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