medium · Asset-Backed Securities tranching
A transaction features an 'OC Step-up' trigger. If the initial overcollateralization is 1.00% and the trigger requires a step-up to 3.00% of the initial pool balance, how is this additional $20,000,000 (on a $1.0bn pool) typically funded?
- By redirecting excess spread away from the residual holder
- Through a mandatory capital call made to the investors.
- By having the servicer advance the necessary funds itself, out of pocket.
- By issuing additional subordinate bonds to raise the extra needed cash.
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