Junior notes

The calculation of credit enhancement for notes in a master trust transaction seems more complicated than in a traditional pass-through transaction because subordinated notes from an earlier series are expected to be redeemed before the senior notes of later series. However, if the mortgages were to perform poorly, the trigger events ensure that all outstanding junior notes would only be repaid after all the senior notes. So the credit enhancement can be calculated as the aggregate balance of subordinate notes as a proportion of the total notes outstanding. 

The notes are expected to redeem a whole series at a time, so the proportions of senior to junior notes will stay approximately the same and there is unlikely to be any upwards ratings drift due to notes being redeemed. 

Structure The introduction of moderate leverage allowed junior notes (only 3-times leveraged) to receive enhanced returns while still achieving an investment-grade rating (BBB by S P Baa2 by Moody s). 

The expected return of the junior note (the shaded piece in Exhibit 15.12) is shown at Exhibit 15.13 as a spread over LIBOR. 

Payments of interest on the Jnnior Notes are subordinate to the payment of interest on the Senior Notes and therefore the holders of the Junior Notes are only entitled to the funds that are available for distribution after having made the payment under the Senior Notes. In this transaction, the Class C-1 Noteholders requested their Notes to be amortizing and so wanted their interest amount to be divided into a fixed interest portion. This will need some tax planning as described in the section Tax Issues below in order to prevent increasing the tax liability of the Issuer. 

The Senior Notes shall be redeemed (in whole but not in part) by the Issuer at the direction of the holders of more than 50% of the aggregate principal amount outstanding as at the Final Closing Date of the Junior Notes. Any such redemption is subject to the following conditions (a) no such redemption may occur on any date other than an Interest Payment Date (b) other than as a result of the occurrence of certain tax events, no such redemption may occur prior to the end of the Reinvestment Period and (c) no optional redemption of the Senior Notes may occur unless there are sufficient proceeds to repay all the Senior Notes and any accrued and unpaid fees and expenses. 

On any Interest Payment Date on or after payment in full of the Senior Notes and any accrued fees and expenses, the Junior Notes shall be redeemed (in whole but not in part) by the Issuer at the direction of holders more than 50% of the aggregate principal amount outstanding as at the Final Closing Date of the Junior Notes. 

The Junior Notes will be mandatorily redeemed if all the portfolio is sold as a result of defaults on the portfolio. 

Also, care should be taken on the drafting of the distributions to the Income noteholders the Luxembourg income tax (LIR) provides for the non-deductibility of the distribution of taxable income (i.e., the annual profits) or the liquidation proceeds of the SPV. Documentation should clearly state that the holders of the Junior Notes will receive the residual amount of the interest received by the SPV under the Collateral Debt Securities and not a residual amount of the overall profits of the SPV. 

As illustrated in Figure 15.1, in a securitization the issued notes are structured to reflect specified risk areas of the asset pool, and thus are rated differently. The senior tranche is usually rated AAA. The lower-rated notes usually have an element of overcollateralization and are thus capable of absorbing losses. The most junior note is the lowest rated or nonrated. It is often referred to as th.t first-loss piece, because it is impacted by losses in the underlying asset pool first. The first-loss piece is sometimes called the equity piece or equity note (even though it is a bond) and is usually held by the originator. 

Senior Junior note classes credit enhancement is provided by subordinating a class of notes ( class B notes) to the senior class notes ( class A notes). The class B note s right to its proportional share of cash flows is subordinated to the rights of the senior noteholders. Class B notes do not receive payments of principal until certain rating agency requirements have been met, specifically satisfactory performance of the collateral pool over a predetermined period, or in many cases until all of the senior note classes have been redeemed in full. 

Excerpt IIC is from the REP for the NSF Faculty Early Career Development Award in Chemistry (CAREER), a prestigious award offered by the NSF to exceptional junior faculty. In the rest of this module, we use excerpts from successful CAREER proposals to illustrate effective proposal-writing techniques and to apply the read-analyze-write approach to writing hence, it is important that you review the REP that motivated these proposals. (Note CAREER proposals require authors to describe, in what the NSF calls a Career-Development Plan, both research and educational activities. In this textbook, we focus almost exclusively on the research activities proposed by the CAREER authors.)... 

A young mother (of scientific inclination) notes that her son Junior s favorite playthings are a set of 37 building blocks. Part of each day s task is gathering up the blocks that Junior has strewn about the nursery (perhaps hidden under the bed or behind the closet door). Although the blocks are of many markings and colorations, and sometimes deviously hidden, she recognizes a useful block-conservation principle ... 

Even where Britain displaced early overseas Chinese financial interests from positions they had enjoyed in the precolonial period, they left them in local control or in a junior status in such ureas as opium trading, and often virtually restricted them to those areas. As W.J. Cator notes in his book The Economic Position of the Chinese in the Netherlands Indies (6) and Purcell notes in The Chinese in Malaya, (7) Chinese monopolies of opium and alcohol local distribution continued in many Southeast Asian colonies, under the aegis of the colonial authorities, into the first decades of the 20th century. 

In 1937, Crowfoot acquired her first graduate student, Dennis Riley. Riley had invited Crowfoot to address the Junior Alembic Club and, having become excited by her research, insisted that he wished to work with her. His request was not looked upon favourably by fellow chemists. Riley noted ... 

Gibson-Watt, J., James Watt and the Doldowlod Estate. Extracts from the Correspondence and Notes of James Watt and James Watt Junior, 1798-1819 , typescript, Archives, Birmingham Central Library. 

For several days I explained to the laboratory crew of soldiers and civilians how we measured gas concentrations by electrical resistance in a water solution, and they planned to set up such a system. Each Saturday morning the laboratory staff stopped their work, dismantled their apparatus, cleared everything off the laboratory benches, washed and dried the table tops, and swept the room. The commanding officer carried out his weekly inspection. He walked into the room accompanied by two junior officers, quickly glanced around the room, wiped a finger over the top of the laboratory bench, noted that his finger was clean, and marched out of the room. 

Early in his quest for vitamin B,2, Woodward noted the curious stereochemistries of some rearrangements and consulted a gifted young theoretician, Roald Hoffmann, a Harvard Junior Eellow. The Woodward-Hoffmann rules were published in 1965 and started a revolution in the way chemists treated concerted reactions such as the Diels-Alder... 

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