Bullet Loan
Short definition
A bullet loan pays (usually) interest only during the tenor and repays principal in one shot at maturity. Interim DSCR looks easy; maturity day is a refinancing or cash shock.
Detailed explanation
Interest-only plus a full principal at the end is common in project and bond markets. Interim DSCR stays high because the denominator has no principal; in the maturity year the denominator gaps. The refinancing assumption depends on rates and whether the market is open.
Partial amortisation plus a residual balloon is a hybrid. Calls and cash sweeps can cut the bullet early.
Why it matters for the CFO
Measuring capacity on interim DSCR ignores maturity day. The maturity-wall tool exists for this structure.
How to read it
Interim DSCR of 2.0x and maturity-year 0.4x can average 1.5x and mislead. Without a cash buffer or committed take-out, a bullet is contingent equity: if the market is shut, equity must pay.
Numerical example
Principal 200 mn TL, annual interest 80 mn TL, year-5 principal + interest = 280 mn TL service. CFADS 150 → maturity-year DSCR = 150 / 280 ≈ 0.54x.
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Definitions are educational. They are not investment, credit or tax advice.