medium · Asset-Backed Securities
In the 'Auto ABS Capital Stack' worked example, the Class D tranche is described as having 8.0% credit support.
If a $25M loss occurs in a single month and the excess spread for that month is0.8M and OC is $15M, what is the impact on Class D?
- Class D is unaffected because it is a rated investment-grade tranche.
- The loss is shared pro-rata among all bond classes, including Class A.
- Class D is completely wiped out by the $25M loss.
- Class D absorbs the remaining $9.2M of the loss after spread and OC are exhausted.
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