medium · Asset-Backed Securities
A healthcare receivables facility uses a dynamic advance rate.
If 'Eligible Net Receivables' are $100 million and the advance rate is 80%, but the net collection ratio falls from 95% to 85%, what is the impact on the residual holder's monthly cash flow?
- The residual holder's cash flow is reduced because the excess of collections over the advance has narrowed.
- The advance rate automatically increases to 90 percent to compensate for the lower collection volume.
- The residual holder receives a compensating true-up payment from the trustee to preserve the 20 percent margin.
- There is no impact whatsoever on the residual holder, as the facility size is fixed permanently at 80 million dollars.
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