Pro-Rata Tranche

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.


BREAKING DOWN '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. Revolving Credit

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

    A loan offered by a group of lenders (called a syndicate) who ...
  4. Loan Syndication

    The process of involving several different lenders in providing ...
  5. Term Loan

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

    A piece, portion or slice of a deal or structured financing. ...
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. Investing

    3 Healthy Financial Habits for 2016

    ”Winning” investors don't just set it and forget it. They consistently take steps to adapt their investment plan in the face of changing markets.
  4. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  5. Economics

    The Truth about Productivity

    Why has labor market productivity slowed sharply around the world in recent years? One of the greatest economic mysteries out there.
  6. Term

    How Market Segments Work

    A market segment is a group of people who share similar qualities.
  7. Active Trading

    Market Efficiency Basics

    Market efficiency theory states that a stock’s price will fully reflect all available and relevant information at any given time.
  8. Investing Basics

    10 Habits Of Successful Real Estate Investors

    Enjoying long-term success in real estate investing requires certain habits. Here are 10 that effective real estate investors share.
  9. Investing Basics

    5 Types of REITs And How To Invest In Them

    Real estate investment trusts are historically one of the best-performing asset classes around. There are many types of REITs available.
  10. Investing Basics

    5 Simple Ways To Invest In Real Estate

    There are many ways to invest in real estate. Here are five of the most popular.
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 a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  3. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  4. What is securitization?

    Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming ... Read Full Answer >>
  5. What is the difference between positive and normative economics?

    Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic ... Read Full Answer >>
  6. Can hedge funds trade penny stocks?

    Hedge funds can trade penny stocks. In fact, hedge funds can trade in just about any type of security, including medium- ... Read Full Answer >>
Hot Definitions
  1. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  2. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  3. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  4. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  5. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
Trading Center