parallel loan

Parallel loan

A process whereby two companies in different countries borrow each other's currency for a specific period of time, and repay the other's currency at an agreed maturity for the purpose of reducing foreign exchange risk. Also referred to as back-to-back loans.

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.

parallel loan


parallel loan

References in periodicals archive ?
The financing package includes a $54mn loan from the IFC and $134 million from other senior lenders, including a parallel loan from Japan International Cooperation Agency (JICA) , IFC said in a statement.
Announcing the deal, alfanar said the EBRD loan will be complemented by a parallel loan of up to $28.
In addition, IFC said it is mobilizing a USD4 million parallel loan from the Inter-American Development Bank.
1m from UniCredit through a syndication loan, while OPIC provided a USD50m parallel loan.
It will provide Coopenae up to $15 million and mobilize a parallel loan of up to $15 million, from the Netherlands Development institution FMO.
According to Hatano, a parallel loan from the Extended Fund Facility of the International Monetary Fund totaling 150 billion yen will be used to support economic rehabilitation and structural adjustments in the Indonesian economy, which was seriously affected by the Asian economic crisis.
If Company B, operating in Country A, faces the analogous situation, however, the two companies can eliminate exchange risk through a parallel loan.
The financing package for the 248-megawatt Baynouna facility developed by Masdar, Abu Dhabi Future Energy Company, includes $54 million from IFCs own account and $134 million mobilized from other senior lenders including a parallel loan from Japan International Cooperation Agency (JICA).
The European Investment Bank (EIB) is also providing a parallel loan of $120.
Turkeys largest lender Isbank is extending a parallel loan of 16 million.
A senior secured A/B and/or parallel loan of up to USD 103 million to TexolTrans LLP, the owner of one of the largest fleets of liquid petroleum gas (LPG) tank wagons in Kazakhstan.

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