4.9.9.2 Specifying Processing Rules for the Tranche

You can define the processing rules for each of the following:

• Repayment

  The repayment processing rule for drawdowns default from the tranche product. You can change it at the tranche level. This becomes applicable to all drawdowns under the tranche.

  You can select a rule from the following options:
  • FIFO: In this method, the drawdown schedule repayment amounts commence from the start date and default the repayment schedules on each of the reduction schedule date to the extent of the reduction amount until the entire drawdown repayment schedule is arrived at.

    Example

    Tranche Amount: 50,000 USD

    Dates	Tranche Reduction Schedule	Tranche Available Amount	Drawdown Repayment Schedule	Drawdown Outstanding Amount
    31-Mar-04		50,000		20,000
    30-Apr-04	10,000	40,000	10,000	10,000
    31-May-04	10,000	30,000	10,000	0
    30-Jun-04	10,000	20,000
    31-Jul-04	10,000	10,000
    31-Aug-04	10,000	0

  • Pro-rata: In this method, the drawdown schedule repayment amount is in the same proportion as the ratio of tranche reduction amounts and tranche amount.

    Example

    Tranche Amount: 50,000 USD

    Dates	Tranche Reduction Schedule	Tranche Available Amount	Drawdown Repayment Schedule	Drawdown Outstanding Amount
    31-Mar-04		50,000		20,000
    30-Apr-04	10,000	40,000	4,000	16,000
    31-May-04	10,000	30,000	4,000	12,000
    30-Jun-04	10,000	20,000	4,000	8,000
    31-Jul-04	10,000	10,000	4,000	4,000
    31-Aug-04	10,000	0	4,000	0

  • LIFO: If you choose this option, the drawdown schedule repayments commence from the end date and default to the same amount as the tranche reduction amount until the system arrives at the entire repayment schedule.

    Example

    Tranche Amount: 50,000 USD

    Dates	Tranche Reduction Schedule	Tranche Available Amount	Drawdown Repayment Schedule	Drawdown Outstanding Amount
    31-Mar-04		50,000		20,000
    30-Apr-04	10,000	40,000		20,000
    31-May-04	10,000	30,000		20,000
    30-Jun-04	10,000	20,000		20,000
    31-Jul-04	10,000	10,000	10,000	10,000
    31-Aug-04	10,000	0	10,000	0

• Drawdown Expiry
  You can define the last date upto which you can process drawdowns at the tranche level. This is captured in the DD Expiry Dt field in the CONTRACT tab of the screen. Beyond this date, the system does not allow you to process fresh drawdowns under the tranche. On this date, the system cancels the un-drawn portion of the tranche and cascade the cancellation amount to the remaining tranche reduction schedules based on the expiry processing rule which defaults from the product. However, you can choose a different rule at the tranche level. The options are:

  • FIFO
  • Pro-rata
  • LIFO

  The system checks if the aggregated expected principal of all drawdowns is within the new tranche available amount (Original Tranche Amount – Cancellation Amount) for all future dates. The system displays an override if the amount is not within the new tranche available amount.

  For more details on the above rules, refer the heading Specifying Additional Preferences for Loan Syndication in the Defining Products for Loan Syndication chapter of this User Manual.

  On the drawdown expiry date, after the tranche is closed, the system automatically selects the Drawdown Expiry option in the CONTRACT tab of the screen. This indicates that you cannot process any more drawdowns under the tranche.

• Grace Days

  For a tranche contract, system defaults the value of Grace Days maintained at the borrower tranche product level. However, you can modify this value during contract input and contract amendment. During contract amendment, the amended value is applicable to future drawdown linkages and future schedules only.

• Cancellation

  At the tranche level, you can define a rule for tranche cancellation processing also. This is similar to the drawdown expiry date processing discussed above. The only difference being that, while the later is triggered automatically on the drawdown expiry date, the cancellation processing has to be initiated manually.

  The cancellation rule defaults from the product. You can override the default rule and choose a different rule at the tranche level. The options are:
  • FIFO
  • Pro-rata
  • LIFO
  For more details on the above rules, refer the heading Specifying Additional Preferences for Loan Syndication in the Defining Products for Loan Syndication chapter of this User Manual.

  You have to use the Tranche Cancellation screen to initiate the cancellation processing.

  For more details on this screen, refer the heading Cancelling a tranche in this chapter.

• Prepayment

  For a tranche, you can select a rule based on which prepayments for drawdowns are processed in Oracle Banking Corporate Lending. The system rebuilds the reduction schedules based on the rule specified here.

  The options available are:
  • FIFO
  • Pro-rata
  • LIFO
• Tranche Repayment Rule

  Select the repayment rule that gets defaulted to scheduled repayments, unscheduled repayments and prepayments.

  The possible options are as follows:
  • LIFO
  • FIFO
  • PRO-RATA
  FIFO is selected by default.

  The logic of the above rules are same as in drawdown expiry processing and tranche cancellation processing.

  For more details on the above rules, refer the heading Specifying Additional Preferences for Loan Syndication in the Defining Products for Loan Syndication chapter of this User Manual.

  Note:

  The system performs the following on prepayment:

  • Rebuild the tranche reduction schedules.
  • Rebuild existing drawdown repayment schedules. However, the system rebuilds the existing drawdowns repayment schedules automatically only if the repayment schedules have been created without manual intervention. If you have changed the system defaulted repayment schedules for drawdowns under the tranche, Oracle Banking Corporate Lending does not rebuild the repayment schedule automatically on prepayment. You have to change the repayment schedules for each drawdown, if required. Similarly, you have to rebuild the schedules manually if the Auto Repay Schedule is not selected for the contract.
  • Such manual payments are not part of netting on the value date.
  • At the time of prepayment, the system displays a message to indicate that you have to rebuild the schedules manually in case of an earlier manual amendment to the schedules.
• Reduction Schedule Application

  Select this check box to indicate that reduction schedule is applicable for a tranche. After you select this option, you cannot deselect it. Once you select this, you need to define the reduction schedules before you save the contract.

  For more details on this, refer the heading Defining reduction schedules for a tranche in this chapter.
• Auto Repay Schedule
  You have to select this option to instruct the system to automatically rebuild the existing drawdown repayment schedules in case of a repayment/prepayment. The manner in which the system applies this option is discussed below:

  • When you select this option, the repayment rule specified at the tranche level is applied for defining the repayment schedules at the drawdown contracts entered under the tranche. However, you can overwrite the system defaulted schedules, if required. If you choose to overwrite the schedules, auto scheduling does not happen for further drawdowns under the tranche.
  • If you do not select this option, the rule specified at the tranche level is not applied for defining the repayment schedules for the drawdowns under this tranche. Schedules default from the drawdown product but you are allowed to modify the defaulted schedules for a drawdown.

For more details on processing drawdowns, refer the heading Processing a drawdown in this chapter.