Pull-to-Par
Private Credit glossary · Documentation, Covenants & Terms
Definition
The mechanical price appreciation toward 100 (par) of a loan trading at a discount as it nears maturity; a component of yield-to-takeout.
Pull-to-Par in plain English
Loans are usually repaid at 'par,' meaning 100 cents on the dollar of what you lent. If a loan is trading at a discount — say investors will only pay 95 for it because they're nervous — but the borrower is still expected to fully repay at maturity, then as the payoff date nears, that price naturally drifts back up toward 100. That climb is called pull-to-par: it's a built-in gain you collect just by holding the loan to the finish line, on top of the interest. It's like buying a $100 gift card for $95 that you know will be honored for its full $100 soon — the closer you get to using it, the more that $5 gap closes in your favor.
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