Credit enhancement

How it is used

Identify the mechanism, such as a guarantee or junior loss-bearing layer; protection has limits.

Example sentences

1. A guarantee provided credit enhancement for the senior notes.

   An additional promise supports payment on the protected claims.

2. The investor examined whether the credit enhancement could absorb the stressed losses.

   Protection is assessed against the size of possible losses.

Common collocations

• external credit enhancement
• credit enhancement level

Related terms

• credit riskThe risk that a borrower or another party will not pay back money it owes on time or in full, causing a loss for the lender.
• guarantorA person or company that promises to repay a loan if the borrower cannot. The lender can then ask the guarantor to pay.

More terms: Corporate Finance

• cash flow
• capital
• working capital
• leverage
• dividend
• bond
• valuation
• M&A
• IPO
• due diligence
• shareholder
• raise capital