Pay-through
Asset-Backed Securities glossary · Asset Specific Nuances
Definition
A security in which cash flows are restructured (tranched, time-tranched, coupon-altered) before being paid to bondholders.
Pay-through in plain English
A "pay-through" takes the same pool of loan payments but reshapes the cash before handing it out, instead of passing it along untouched. The deal can slice investors into ranked groups (tranches), decide who gets paid earlier vs. later (time-tranching), or change the interest rate a bond pays. Imagine the same rental income, but now the owners agree that one person gets paid back first and fully, another waits and takes more risk for a higher return. This restructuring lets a single messy pool serve very different investors, from safety-seekers to risk-takers, out of the same stream of money.
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