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.

  1. Pro-Rata

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

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

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

    What a Family Tradition Taught Me About Investing

    We share some lessons from friends and family on saving money and planning for retirement.
  4. Investing

    Where the Price is Right for Dividends

    There are two broad schools of thought for equity income investing: The first pays the highest dividend yields and the second focuses on healthy yields.
  5. Personal Finance

    How Tech Can Help with 3 Behavioral Finance Biases

    Even if you’re a finance or statistics expert, you’re not immune to common decision-making mistakes that can negatively impact your finances.
  6. Investing Basics

    5 Tips For Diversifying Your Portfolio

    A diversified portfolio will protect you in a tough market. Get some solid tips here!
  7. Entrepreneurship

    Identifying And Managing Business Risks

    There are a lot of risks associated with running a business, but there are an equal number of ways to prepare for and manage them.
  8. Forex Education

    Explaining Uncovered Interest Rate Parity

    Uncovered interest rate parity is when the difference in interest rates between two nations is equal to the expected change in exchange rates.
  9. Fundamental Analysis

    Using Decision Trees In Finance

    A decision tree provides a comprehensive framework to review the alternative scenarios and consequences a decision may lead to.
  10. Economics

    Understanding Tragedy of the Commons

    The tragedy of the commons describes an economic problem in which individuals try to reap the greatest benefits from a given resource.
  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. 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 >>
  3. Are FHA loans fixed?

    An FHA loan is a mortgage loan backed by the government that offers more flexible lending requirements than those of conventional ... Read Full Answer >>
  4. Can Sallie Mae garnish my wages?

    Private lenders such as Sallie Mae can garnish wages. In the case of federal student loans, the government has the power ... Read Full Answer >>
  5. Can hedge funds outperform the market?

    Generating returns that exceed those provided by the broader market is the goal of nearly every investor. However, the methods ... Read Full Answer >>
  6. 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 >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center