medium · Asset-Backed Securities asset-nuances
A healthcare receivables ABS facility uses a 'Dynamic Advance Rate' currently set at 80%. The trust observes that the 'Denial Ratio' has increased from 5% to 12% over the last quarter.
What is the most likely structural consequence of this shift?
- The provider must immediately repurchase every receivable in the pool that is aged past 60 days.
- The early amortization trigger tied to excess spread will automatically and immediately activate.
- The advance rate will be formulaically reduced to compensate for the higher expected non-collection risk.
- The trustee will immediately replace the hospital's entire billing department with a new backup servicer team.
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