medium · Asset-Backed Securities
A sponsor transfers 100 million of consumer loans to a bankruptcy-remote SPE and receives 95 million cash plus a $5 million subordinated note. The sponsor can unilaterally require return of any specific performing loan at par at any time, and the stem stipulates that this right provides a more-than-trivial benefit because the selected loans can have fair value above par. Assuming the other ASC 860 sale conditions are met, how is the transfer accounted for?
- Sale treatment solely because the SPE is bankruptcy-remote
- A secured financing
- Sale treatment with a retained subordinated interest
- Sale treatment with an immediate $5 million gain
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