- tranche
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tranche /'trä sh/ n [French, literally, slice, from Old French, from trenchier trancher to cut]: a division or portion of a pool or whole: asa: an issue of bonds derived from a pooling of like obligations that is differentiated from other issues esp. by maturity or rate of returnb: a bond series issued for sale in a foreign country
Merriam-Webster’s Dictionary of Law. Merriam-Webster. 1996.
- tranche
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United KingdomFrom the French word meaning "slice", the term "tranche" is predominantly used in two scenarios:• In relation to a structured note issuance, (being debt securities (debt security) in the form of bonds or notes which are divided into different "classes" of debt securities), a "tranche" denotes each class of notes comprising the same issue. A tranche will be assigned characteristics which may vary from those of other tranches, such as different rates of interest, repayment terms, credit rating and priority ranking); essentially affording each class a different risk profile to match the varrying risk appetites of investors.For more on tranched securities, see PLC Finance, Practice note, Collateralised debt obligations (CDOs): overview - Structuring a CDO - Tranching (www.practicallaw.com/9-385-8080).• In relation to a facility agreement, a loan may consist of a number of tranches (sometimes also referred to as alphabet notes), each with differing characteristics, such as availability periods, interest rates, repayment terms, currencies or maturity dates.+ trancheUSAA group of securities issued at the same time by the same issuer that have differing characteristics such as risk, reward, maturity, and credit rating.In structured finance, it refers to one of several related securitized bonds offered as part of the same collateralized debt obligation, where each bond is a slice of the deal's risk. Tranches are usually identified by letters, with AAA ("triple A") the most senior, least risky, lowest return bond, down through AA, A. A junior, unsecured tranche may be rated BB. However, ratings can fluctuate after the debt is issued and even senior tranches could be rated below investment grade (less than BBB). The bond's indenture usually details the payment of the tranches in a section often referred to as the waterfall (because the moneys flow down).In a loan agreement, a loan may consist of a number of tranches with separate drawdowns, interest rates and repayment terms.
Practical Law Dictionary. Glossary of UK, US and international legal terms. www.practicallaw.com. 2010.
