In a securitization, what is an early amortization provision?
What will be an ideal response?
There are provisions in credit card receivable-backed securities that require early amortization of the principal if certain events occur. Such a provision, which is referred to as either an early amortization provision or a rapid amortization provision, is included to safeguard the credit quality of the structure. The only way that the principal cash flows can be altered is by triggering the early amortization provision. Typically, early amortization allows for the rapid return of principal in the event that the three-month average excess spread earned on the receivables falls to zero or less. When early amortization occurs, the bond classes are retired sequentially (i.e., first the AAA bond then the AA rated bond, etc.). This is accomplished by distributing the principal payments to the specified bond class instead of using those payments to acquire more receivables.
The length of time until the return of principal is largely a function of the monthly payment rate (MPR). MPR expresses the monthly payment (which includes finance charges, fees, and any principal repayment) of a credit card receivable portfolio as a percentage of credit card debt outstanding in the previous month. For example, suppose a $600 million credit card receivable portfolio in February realized $60 million of payments in March. The MPR for March would then be 10% ($60 million divided by $600 million). The MPR is important for two reasons. First, if the MPR reaches an extremely low level, there is a chance that there will be extension risk with respect to the principal payments to the bond classes. Second, if the MPR is very low, then there is a chance that there will not be sufficient cash flows to pay off principal. This is one of the events that could trigger the early amortization provision.
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The legal interpretation of the supervisory exclusions to the NLRA was recently addressed in three cases involving nurses known collectively as the ________ cases.
Fill in the blank(s) with the appropriate word(s).
Don works at the local gas station and garage. Don's boss, Betsy, encourages Don to find brake problems with out of state cars that come to the station. Usually Don tells the driver that their brakes are leaking fluid, and offers to replace the brakes at a good price. The cost is low because Don does nothing more than remove the tires and look at the old brake pads. One day a woman with five kids
comes to the station and Betsy tells Don to "do a brake job." Don does not want to have five kids running around the station and tells the lady that they are out of gas and to go down the street to the next station. Can Betsy fire Don? a. Yes, unless the station had gas. b. Yes, because Betsy ordered him to perform a service and Don refused. c. No, but Don is liable for any economic loss Betsy suffered. d. No, because Betsy ordered him to perform an illegal act.
A partner is entitled to make secret profits or put self-interest before his or her duty to the interest of the partnership.
Answer the following statement true (T) or false (F)
Maria owns and operates a catering business. This is an example of a
A. distribution business. B. production business. C. service business. D. retailer. E. manufacturer.