East Bank securitises a $50 million pool of its business loans. The asset backed securities (ABS) issued, as a result, come in 3 tranches of bonds: one $10 million tranche with an AAA rating bought by an insurance company fund, a $25 million tranche with a BB rating bought by a superannuation fund and one tranche $15 million with a CCC rating sold to a managed fund.

c) Identify which securities form the junior, the mezzanine and the senior tranches. Which of the three investors, the insurance company, the superannuation and the managed fund, will receive the interest first? Which of the three investors will be hit first if the loans do not generate enough interest? Explain your answers in details.

(3 marks)