B-piece
Asset-Backed Securities glossary · Asset Specific Nuances
Definition
The most subordinate bonds in a CMBS transaction, typically including non-investment-grade rated tranches and the unrated first-loss piece.
B-piece in plain English
Imagine a bunch of investors pool money to buy a giant loan backed by shopping malls and office buildings, then slice the repayments into layers. The 'B-piece' is the bottom layer — the first to lose money if borrowers stop paying, and the last to get paid. Because it absorbs the earliest losses, it's risky (rated below 'investment grade,' or not rated safe at all), so it pays the highest return to whoever's brave enough to hold it. Think of it as the person at the very back of the lifeboat line: if the ship takes on water, they get wet first, so they demand extra reward for that spot.
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