tranche (tranche) in translation from French means a portion or share of securities, bonds, the issue of which takes place to improve market conditions.
view of the specific use of the instrument can be conventionally delimit its scope as follows:
- Investing and the stock market.
- lending institutions with banks.
- Provision States tranche of the IMF.
understanding of the word "tranche" must come from the above distinctions and methods of providing financial assistance.What tranches in investing?This issue securities (CB) with the same conditions, regardless of when the portion of the total output will be used.That is part of the Central Bank granted gradually, when the deal was made by the borrower in the payment of the first issue.
What tranches in lending?The bank sets a limit issuing funds for the organization of the borrower (credit line), and within this limit gives him the necessary sum.In this organization, the borrower has the right to use a new share of the loan on demand, if all the obligations to pay the debt were made after the first tranching.
What tranche of the International Monetary Fund (IMF)?They are comparable to a line of credit organizations, except for the conditions of their provision.As a rule, the IMF puts certain requirements for non-compliance which the country may be left without funding.The requirements of the IMF may be political and economic in nature.
tranche and the conditions of
What is a credit tranche described above.Often there is the concept of "credit line", which is identical to the above title.As part of the agreement between the bank and the borrower are stipulated all the conditions and repayment of the credit line.The focus of this document is devoted to limit issuance.Exceeding the limit calculated under the contract tranching impossible.But on the unused balance of the credit bank may impose additional percentage (about 0.5% per year, depending on many factors).Thus, the bank encourages the borrower to the full advantage of the provision of credit.
conditions under which credit tranche issued are listed below.
- refund in accordance with the payment schedule.
- Accrual of interest for credit facilities.
- solvency or collateral on the loan in the form of their own profitable assets of the borrower.
tranche of loans
What is the provision of one tranche under the loan agreement?To understand this question is fairly easy if you do not forget the meaning of the word tranche.Recall from the French it is translated as "part".Accordingly, the provision of tranches - the share of this issue within the established limit for the borrower.
Each tranche may be granted at the request of both the borrower during the term of the contract, and in a clear time frame.All the nuances of the transaction stated in the loan agreement.The borrower is required to fulfill their obligations on time and in full.A lender, in turn - to provide on-demand organization installment borrowing.
Benefits credit line
Unlike issuing standard bank loans, line of credit is more attractive for borrowers and for financial institutions.The main advantages of tranching under the credit line are as follows.
- Unlimited trenches.Repeated use of the loan funds.The credit line can be renewable with a certain limit issue and not renewable.In the second embodiment, the loan organization can use several tranches, but the total amount can not exceed the specified limit.If a line of credit is renewable, it is taken at maturity tranche borrower can use it again.For example, the limit on the credit revolving line of one million dollars.Borrower claimed for the first tranche of 300 000 dollars, paid to it in the period of the contract (2 months), then the maximum he could again use the one million dollars.And in the case of non-revolving line of credit limit next part of the loan for it was only 700 thousand dollars.
- Interest on tranche may be assessed in different ways - can be standard, that is fixed irrespective of the limit provided for the duration of the contract.Or may have specific terms of charges.The Bank can offer the borrower the different conditions of interest accrual for each tranche.Interest in any case, is charged only on the amount consumed (tranche).
- Debt cancellation occurs automatically when the flow of funds to the account of the organization, which is very convenient as it saves time.