medium · Asset-Backed Securities waterfalls
A credit-card series uses the following document-defined early-amortization provision: once early amortization begins, revolving reinvestment ends and the series' share of principal collections is paid monthly first to Class A, then Class M, Class B, and Class C until each is paid.
Which consequence follows from that provision?
- Apply series principal monthly in the stated Class A, M, B, then C order.
- Pay Class C principal first so the most subordinate class retires immediately.
- Keep buying new receivables while doubling every outstanding class's coupon.
- Send every principal collection to the seller until excess spread turns positive.
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