Chapter 21, Problem 12DQ

Summary Introduction

To explain: The differences between parallel and fronting loans.

Introduction:

Parallel loan:

It is an arrangement among four parties in which two parent companies operating in different countries borrow money in their local currency and lend that money to their other local subsidiaries. 

Fronting loan:

It is a three-party arrangement in which a debt obligation is provided to a parent company that ultimately distributes this fund to its subsidiaries or other local units.