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Finance

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  • 338
  • January 19, 2022
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Drop-Lock FRN

A floating-rate note (FRN) which has a rate trigger allowing the interest to convert to a specified fixed rate for the remaining life of the underlying debt instrument should the floating rate reaches or drops below a pre-determined level on an interest fixing (resetting) date or on a number of consecutive fixing dates. For example, a drop-lock feature may be added to a loan so that the lender can convert the floating rate to a fixed rate if the benchmark index hits a specified floor.

A drop-lock FRN is also referred to as a drop-lock floater.


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