what is the difference between a debt tranche and an equity tranche 
there are two main types of tranches used when selling a clo debt tranches and equity tranches debt tranches also called mezzanine are those that offer the investor a specified stream of interest and principal payments similar to those offered by other debt instruments such as debentures or corporate bonds equity tranches on the other hand do not pay scheduled cash flows to the investor but instead offer a share of the value of the clo if the clo is re sold in the future within each of these categories many different tranches might be available with the riskier tranches offering higher potential returns 