medium · Asset-Backed Securities waterfalls
A Whole Business Securitization (WBS) for a restaurant chain includes a rapid amortization trigger if the Debt Service Coverage Ratio (DSCR) falls below 1.75x.
If the SPV has $50M in annual royalty income and the annual debt service is $30M, what happens to the waterfall?
- Rapid amortization is triggered.
- The Class A-1 notes are immediately written down.
- The SPV continues normal operations as DSCR is above 1.50x.
- Excess spread is released to the restaurant sponsor.
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