back-to-back loan

Back-to-back loan

A loan in which two companies in separate countries borrow each other's currency for a specific time period and repay the other's currency at an agreed-upon maturity.

Back-to-Back Loan

A situation in which two companies in different countries borrow an equivalent amount from each other in their respective currencies. That is, there is no net capital output because the companies are borrowing the same amount, only in different currencies. The companies repay these loans in an agreed-upon period of time. This used to be a common way to hedge against currency fluctuations, though currency swaps have largely replaced them.

back-to-back loan

or

parallel loan

an arrangement under which two companies in different countries borrow each other's currency and agree to repay the loans at a specified future date. At the expiry date of the loans each company receives the full amount of its loan in its domestic currency without risk of losses from exchange-rate changes. In this way back-to-back loans serve to minimize EXCHANGE RATE EXPOSURE.

back-to-back loan

or

parallel loan

an arrangement under which two companies in different countries borrow each other's currency and agree to repay the loans at a specified future date. At the expiry date of the loans, each company receives the full amount of its loan in its domestic currency without risk of losses from exchange-rate changes. In this way back-to-back loans serve to minimize EXCHANGE-RATE EXPOSURE.
References in periodicals archive ?
A back-to-back loan arrangement occurs when a member borrows money from a third party and then lends the money to the LLC.
On behalf of Tax Executives Institute (TEI), I am writing to express our comments and concerns about the revised proposals relating to back-to-back loan arrangements through intermediaries (hereinafter "the Proposals").
Roman Abramovich's policy of signing new players every season - instead of promoting any junior level players - has seen highly rated youth products, such as Josh McEachran and Jeffrey Bruma, going away on back-to-back loan spells, despite proving themselves at Stamford Bridge.
In a leveraged ESOP, the loan is referred to as a "back-to-back loan." The company borrows money, which is loaned to a tax-favored ESOP trust.
To avoid this, UK companies set up back-to-back loan agreements with US companies wishing to borrow Sterling.
He will also face questions about his role in the EUR7.5billion back-to-back loan from Irish Life & Permanent to Anglo - a move which made the bank's balance sheets look better than they were.
There are several separate investigations into what went on at the bank which fooled investors by getting a EUR7.5billion back-to-back loan from a rival to boost its balance sheet for year end accounts.
Its origin can be traced to the late 1970s as a byproduct of back-to-back loans. A back-to-back loan involves two companies, each in different countries, borrowing money from local banks and then loaning money to each other.
A back-to-back loan arrangement using a hybrid entity may lower the effective foreign corporate income tax burden.
The courts and the Service have allowed shareholder debt basis for back-to-back loan and loan substitution transactions that result in indebtedness of the S corporation to the shareholder.
The back-to-back loan is very similar to the leveraged ESOP loan.
If the shareholder or partner lacks the funds necessary to make the loan, a so-called back-to-back loan, in which the shareholder or partner borrows funds from a third-party lender and then relends them to the entity, can be used.