ABF Glossary

Lending secured by a borrower's assets, typically receivables and inventory, with borrowing capacity tied to a formula-based borrowing base.

Securities whose value and income payments are derived from and collateralized by a pool of underlying assets.

The percentage of eligible collateral value that can be borrowed. Varies by asset type: 80-90% for receivables, 50-65% for inventory.

The gradual repayment of principal over time, either scheduled (term loans) or through collections (securitizations).

A third party ready to assume servicing responsibilities if the primary servicer fails or is terminated.

Legal structure ensuring that an SPV's assets are protected from the bankruptcy of its parent or originator.

The calculated amount available to borrow based on eligible collateral, advance rates, and reserves. Typically: (Eligible A/R × AR Advance Rate) + (Eligible Inventory × Inv Advance Rate) - Reserves.

Regular report submitted by borrower certifying the calculation of the borrowing base and compliance with facility terms.

A fund's formal request for LPs to contribute committed capital, typically to fund investments or repay subscription lines.

Annualized rate at which loans in a pool default, typically calculated as: CDR = 1 - (1 - MDR)^12.

A securitization backed by a pool of leveraged loans, typically managed actively by a collateral manager.

Total losses since transaction inception as a percentage of original pool balance: (Gross Losses - Recoveries) ÷ Original Balance.

Party responsible for perfecting and maintaining security interests in collateral on behalf of lenders.

Maximum exposure allowed to a single obligor, industry, or geography, expressed as a percentage of total collateral.

Contractual promise in loan documentation, either affirmative (do something), negative (don't do something), or financial (maintain ratios).

Annualized rate at which loans prepay, calculated as: CPR = 1 - (1 - SMM)^12.

Structural features that improve credit quality of securities, including subordination, overcollateralization, excess spread, and reserves.

Rule excluding all receivables from an obligor if any single invoice exceeds specified aging threshold (e.g., 90 days).

Reduction in receivable value from credits, returns, allowances, or disputes. Dilution rate = Non-cash credits ÷ Gross Sales.

Number of days a payment is overdue. Standard buckets: 30 DPD, 60 DPD, 90+ DPD.

Rules defining which assets qualify for inclusion in a borrowing base or securitization pool.

Difference between yield on assets and cost of liabilities plus expenses. Acts as first-loss protection.

On-site audit by lender or third party to verify collateral existence, valuation, and borrower controls.

The equity or most subordinate tranche that absorbs initial losses before other tranches are affected.

Independent party representing noteholder interests in a securitization, responsible for enforcing documentation.

Investor in a private fund who commits capital but has limited liability and no management control.

Ratio of loan amount to collateral value. Key metric in real estate and NAV lending.

Party overseeing primary servicers and responsible for consolidated investor reporting.

Credit facility secured by portfolio investments based on their net asset value, typically at 10-50% LTV.

Estimated recovery value from orderly sale of assets, net of disposition costs.

Party owing money on an underlying asset—the customer on a receivable or borrower on a loan.

Structural credit enhancement where asset value exceeds note value. Initial OC builds cushion for losses.

Party that creates underlying assets—the lender writing loans or seller generating receivables.

Situation where outstanding borrowings exceed the borrowing base, requiring cure.

Current pool balance divided by original pool balance, showing how much of the pool remains.

Early repayment of principal before scheduled maturity or contractual due date.

Distribution method where payments flow proportionally to all tranches simultaneously.

Time during which a warehouse facility or CLO builds up its asset portfolio to target size.

Funded account held to cover potential shortfalls—cash reserve, spread account, or liquidity reserve.

Regulatory requirement that securitization sponsors retain 5% economic interest to align incentives.

Probability of loans moving between delinquency states from one period to the next.

Age of loans since origination. More seasoned portfolios have demonstrated performance track records.

Distribution method where senior tranches receive all principal until paid in full before junior tranches.

Party responsible for collecting payments, managing delinquencies, and handling borrower communications.

Monthly prepayment rate before annualization to CPR.

Benchmark interest rate based on overnight Treasury repo transactions, replacing LIBOR.

Legal entity created for specific purpose of holding assets, typically bankruptcy-remote from originator.

EU designation for securitizations meeting enhanced criteria, receiving preferential capital treatment.

Credit enhancement through capital structure priority—junior tranches absorb losses before senior.

Credit facility for investment funds secured by LP capital commitments (uncalled capital).

A slice of securities from a securitization with specific risk/return profile and payment priority.

Performance threshold that, when breached, changes cash flow distribution or accelerates amortization.

Legal transfer of assets to SPV that isolates them from originator bankruptcy estate.

Independent party representing investor interests and ensuring compliance with transaction documentation.

Third party that independently verifies collateral quality, eligibility, and borrowing base calculations.

Comparing performance of loans originated in different time periods to identify underwriting trends.

Average interest rate across a pool weighted by outstanding balance.

Average time until principal repayment weighted by payment amount.

Short-term revolving credit facility used to accumulate assets before term financing or securitization.

The sequential priority of payments in a structured finance transaction, defining who gets paid when.