hard · Asset-Backed Securities
If a Dealer Floorplan trust enters early amortization due to manufacturer insolvency, how are principal collections typically allocated among the Seller's Interest and the various series of investor notes?
- Principal is distributed to the Seller's Interest first to provide liquidity to the bankruptcy estate, subject to the automatic stay.
- Principal is allocated pro-rata between the Seller's Interest and Investor Interests until the Seller's Interest hits zero.
- Collections are shared pro-rata among all Series, including the Seller's Interest, to maintain the required minimum 5% floor.
- All principal collections are allocated to Investor Interests until they are retired in full, while the Seller's Interest receives 0 principal.
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