easy · Asset-Backed Securities waterfalls
An auto ABS pool uses a 'Sequential-Pay' principal waterfall.
If the pool has an original balance of $1B and currently consists of Class A-1 ($50M), Class A-2 ($300M), and Class B ($50M), and the pool receives $100M in principal collections this month, how is it distributed?
- $33.3M to each of A-1, A-2, and B to maintain the rating diversity.
- $100M to A-2 because A-1 is a 'money market' tranche and is only paid at the end of the first year.
- $87.5M to the A classes and $12.5M to Class B pro-rata.
- $50M to A-1 (retiring it), then $50M to A-2.
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