Credit Enhancement
Definition
Subordinación
La ordenación estructural de las clases por antigüedad: las pérdidas las absorben primero los bonos júnior antes de llegar a los sénior. También se expresa como 'nivel de mejora crediticia' para el tramo sénior.
Deep Dives
Related Terms
Credit Enhancement
Structural mechanisms that improve the credit quality of notes issued by an SPV, protecting noteholders from losses. Can be internal (OC, excess spread, subordination, reserve accounts) or external (letters of credit, guarantees, insurance wraps).
Over-Collateralisation (OC)
The excess of asset principal over the face value of issued notes; expressed as OC ratio = asset balance / note balance. Example: $110M assets backing $100M notes = 110% OC ratio = 10% OC amount.
Sequential Pay
A principal waterfall in which all available principal is applied to the most senior outstanding tranche until fully repaid before any proceeds flow to junior tranches. Standard during amortisation and post-trigger periods.