Credit Enhancement
Definition
Subordination
L'ordonnancement structurel des tranches par séniorité : les pertes sont absorbées par les obligations junior avant d'atteindre les obligations senior. Aussi exprimé comme 'niveau de rehaussement de crédit' pour la tranche senior.
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.