Tranche

Pardon my French! Tranche, the French word for slice, has come to mean in English a portion or a specific class of bonds within a structured finance deal. The word made it into the news when CBS Radio decided to sue its former employee, shock jock Howard Stern:

"CBS wants Stern, his agent, Don Buchwald, and Sirius to return any financial benefits they received from using CBS radio's air time to promote Sirius, including the value of a tranche of Sirius shares that Stern and Buchwald received early for exceeding a target for subscriber increases by the end of 2005."

Link: CBS Radio Sues Howard Stern

Posted March 2, 2006.

See our Word Overheard blog to see interesting uses of strange words.

A piece, portion or slice of a deal or structured financing. This portion is one of several related securities that are offered at the same time but have different risks, rewards and/or maturities. "Tranche" is the French word for "slice".

Investopedia Says:
Tranche is a term often used to describe a specific class of bonds within an offering wherein each tranche offers varying degrees of risk to the investor. For example, a CMO offering a partitioned MBS portfolio might have mortgages (tranches) that have one-year, two- year, five-year and 20-year maturities. It can also refer to segments that are offered domestically and internationally.

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1. risk maturity or other classes into which a multi-class security, such as a Collateralized Mortgage Obligation (CMO) or a Remic is split. For example, the typical CMO has A, B, C, and Z tranches, representing fast pay, medium pay, and slow pay bonds plus an issue (tranch) that bears no coupon but receives the cash flow from the collateral remaining after the other tranches are satisfied. More sophisticated CMO versions have multiple Z tranches and a Y tranch incorporating a sinking fund schedule.

2. in the United Kingdom, fixed-rate security issues are often prearranged by governments, local authorities, or corporations, then brought out in successive rounds, termed tranches. One thus speaks of new tranches of existing securities. A variation of the term, tranchettes, refers to small tranches of gilt-edged securities (government bonds) sold by the government to the Bank of England, which then sells them into the market at times it deems appropriate.

3. subunits of a large ($10-$30 million) Eurodollar certificate of deposit that are marketed to smaller investors in $10,000 denominations. Tranches are represented by separate certificates and have the same interest rate, issue date, interest payment date, and maturity of the original instrument, which is called a tranch CD.

1. One of the classes of debt securities issued as part of a single bond or instrument, from the French word tranche, meaning slice. Securities often are issued in tranches to meet different investor objectives for portfolio diversification. For example, a Collateralized Mortgage Obligation is a mortgaged-backed security issued with several different bond tranches issued under a single bond indenture, ranging from a fast-pay bond to a long-term slow-pay bond (called the Accrual Bond, or the Z-bond). Each is paid off consecutively; as one bond matures, the next is paid down in a stepping stone progression. Each tranche has a different coupon and maturity, and is identifiable by a different Cusip Number.

2. Separate borrowings or funding commitments under a Term Loan or other credit facility. A multicurrency loan will be structured with a U.S. Dollar tranche, a deutschemark tranche, and so on. World Bank advances to a sovereign borrower are structured in tranches.

3. Single maturity Certificate of Deposit sold by a lead bank, which is then divided into smaller denominations for placement with investors.

4. Gold tranche: first 25% of a member country's contribution to the International Monetary Fund, normally in gold bullion.

5. Reserve tranche: deposit balances subject to Reserve Requirements.

A section of a Mortgage-Backed Security differentiated by maturity or by risk.
Examples:

• Collateralized Mortgage Obligations (CMOs) were issued, backed by 30-year amortizing mortgages. The CMOs were sold in five-year tranches, with investors getting interest plus the principal back at different intervals based on which tranche they acquired.

• In the sale of CMOs, one investor group acquired the rights to the first 80% of principal retired, another group to the next 10%; the final 10% will go to investors who accepted the highest risk of repayment.

This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)

Dansk (Danish)
n. - gruppe, delmængde

Nederlands (Dutch)
deel van een lening

Français (French)
n. - (Fin) tranche

Deutsch (German)
n. - Tranche (Anteil)

Ελληνική (Greek)
n. - κομμάτι, μέρος

Italiano (Italian)
quota

Português (Portuguese)
n. - série de títulos emitidos para venda num país estrangeiro (f)

Русский (Russian)
(франц.) транч, период облигационного выпуска, порция акций

Español (Spanish)
n. - parte, tajada

Svenska (Swedish)
n. - grupp, delmängd, del (ekon. t.ex. av statslån)

中文（简体）(Chinese (Simplified))
收入或股票的部分

中文（繁體）(Chinese (Traditional))
n. - 收入或股票的部分

한국어 (Korean)
n. - 단편, (국채의) 분할 발행분

日本語 (Japanese)
n. - 薄片, 一部分

العربيه (Arabic)
‏(الاسم) ديون ألحكومه, قسط أو جزء كبير من ألمال‏

עברית (Hebrew)
n. - ‮הוספת גוש מניות לאלו שהוצאו כבר, חלק מהכנסה או מגוש מניות, מסלול מסוים להשקעה‬

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