4.7.1 Tranche-level Contracts

After a borrower facility contract has been initiated, a number of arms or tranches can be opened under it, as specified under the contract. The processing of each tranche involves the creation of a simple commitment contract for the borrowing customer against the reference number of the borrower facility contract. This contract constitutes the borrower leg of the processing of the tranche.

When you create the borrower commitment (tranche) contract, you must also specify the following details:

• The participants involved in the tranche, such as the participants. The participants defined for the borrower facility contract is defaulted to the tranche, and you can change the participants if required.
• The ratio of participation. Again, the ratio specified for the participants defined in the borrower facility contract is defaulted to the tranche, and you can change it if required.
• The borrower details.

You must also specify schedules for drawdowns under the tranche. The system generates a reference number for the borrower commitment contract.

After you have entered a borrower tranche contract, when the BOOK event of the contract is triggered, the system automatically initiates commitment contract for the participants. These contracts constitute the participant leg of the processing of the tranche. The system also generates SWIFT messages to each participant according to the drawdown schedule, intimating them to fulfill their commitment and disburse the funds to the nostro account of the arranger bank.

When a tranche is created, a commitment contract is created.