The following information is from the prospectus supplement for US$877,670,000 of auto loan ABS issued by XYZ
Question:
The following information is from the prospectus supplement for US$877,670,000 of auto loan ABS issued by XYZ Credit Automobile Receivables Trust 2019:
The collateral for this securitization is a pool of subprime automobile loan contracts secured for new and used automobiles and light-duty trucks and vans.
The issuing entity will issue seven sequential-pay classes of asset-backed notes pursuant to the indenture. The notes are designated as the “Class A-1 Notes,” the “Class A-2 Notes,” the “Class A-3 Notes,” the “Class B Notes,” the “Class C Notes,” the “Class D Notes,” and the “Class E Notes.” The Class A-1 Notes, the Class A-2 Notes, and the Class A-3 Notes are the “Class A Notes.” The Class A Notes, the Class B Notes, the Class C Notes, and the Class D Notes are being offered by this prospectus supplement and are sometimes referred to as the publicly offered notes. The Class E Notes are not being offered by this prospectus supplement and will initially be retained by the depositor or an affiliate of the depositor. The Class E Notes are sometimes referred to as the privately placed notes.
Each class of notes will have the initial note principal balance, interest rate, and final scheduled distribution date listed in the following tables:
Interest on each class of notes will accrue during each interest period at the applicable interest rate.
The overcollateralization amount represents the amount by which the aggregate principal balance of the automobile loan contracts exceeds the principal balance of the notes. On the closing date, the initial amount of overcollateralization is approximately US$49,868,074, or 5.25% of the aggregate principal balance of the automobile loan contracts as of the cutoff date.
On the closing date, 2.0% of the expected initial aggregate principal balance of the automobile loan contracts will be deposited into the reserve account, which is approximately US$18,997,361.
Based on the information provided, if the first loss on the loans was US$40 million over and above the protection provided by the internal credit enhancements and occurred in January 2020, which class(es) of notes realized losses?
A. Class E and then Class D
B. Each class of subordinated notes in proportion to its principal balance
C. Class E and then each class of subordinated notes in proportion to its principal balance
Step by Step Answer:
A is correct Once the amount of losses exceeds the amount of protection provided by ...View the full answer
