Tranche Type Question

[Yan He]

Does anyone know how can I classified tranche type: AD (accretion directed), SEG (sequantial pay), and EXCH (exchangeable) ---- they are descriptions from Bloomberg. Can I put them under type "Companion"? :wall:wall:wall

 

[John]

these ABS tranches, AD, SEQ or EXCH, are not companion. A companion tranche/bond is associated with a Planned amortization class (PAC), or targeted amortization class (TAC) tranches.

Here's a good description of the bond types: (from Countrywide deal: http://www.sec.gov/Archives/edgar/data/906410/000114420407000105/v061420_424b5.htm)

Categories of Classes

Definitions


Principal Types​

Accretion Directed


A class that receives principal payments from the accreted interest from specified Accrual classes. An accretion directed class also may receive principal payments from principal paid on the underlying Trust Fund Assets for the related series.



Companion Class


A class that receives principal payments on any distribution date only if scheduled payments have been made on specified planned principal classes, targeted principal classes or scheduled principal classes.



Component Securities


A class consisting of “components.” The components of a class of component securities may have different principal and/or interest payment characteristics but together constitute a single class. Each component of a class of component securities may be identified as falling into one or more of the categories in this chart.



Non-Accelerated Senior or NAS


A class that, for the period of time specified in the related prospectus supplement, generally will not receive (in other words, is locked out of) (1) principal prepayments on the underlying Trust Fund Assets that are allocated disproportionately to the senior securities because of the shifting interest structure of the securities in the trust and/or (2) scheduled principal payments on the underlying Trust Fund Assets, as specified in the related prospectus supplement. During the lock-out period, the portion of the principal distributions on the underlying Trust Fund Assets that the NAS class is locked out of will be distributed to the other classes of senior securities.



Notional Amount Securities


A class having no principal balance and bearing interest on the related notional amount. The notional amount is used for purposes of the determination of interest distributions.



Planned Principal Class or PACs


A class that is designed to receive principal payments using a predetermined principal balance schedule derived by assuming two constant prepayment rates for the underlying Trust Fund Assets. These two rates are the endpoints for the “structuring range” for the planned principal class. The planned principal classes in any series of certificates may be subdivided into different categories (e.g., primary planned principal classes, secondary planned principal classes and so forth) having different effective structuring ranges and different principal payment priorities. The structuring range for the secondary planned principal class of a series of certificates will be narrower than that for the primary planned principal class of the series.



Scheduled Principal Class


A class that is designed to receive principal payments using a predetermined principal balance schedule but is not designated as a Planned Principal Class or Targeted Principal Class. In many cases, the schedule is derived by assuming two constant prepayment rates for the underlying Trust Fund Assets. These two rates are the endpoints for the “structuring range” for the scheduled principal class.



Sequential Pay


Classes that receive principal payments in a prescribed sequence, that do not have predetermined principal balance schedules and that under all circumstances receive payments of principal continuously from the first distribution date on which they receive principal until they are retired. A single class that receives principal payments before or after all other classes in the same series of securities may be identified as a sequential pay class.​

Strip

A class that receives a constant proportion, or “strip,” of the principal payments on the underlying Trust Fund Assets.



Super Senior


A class that will not bear its proportionate share of realized losses (other than excess losses) as its share is directed to another class, referred to as the “support class” until the class principal balance of the support class is reduced to zero.



Support Class


A class that absorbs the realized losses other than excess losses that would otherwise be allocated to a Super Senior Class (or would not otherwise be allocated to the Senior Class) after the related Classes of subordinate securities are no longer outstanding.



Targeted Principal Class or TACs


A class that is designed to receive principal payments using a predetermined principal balance schedule derived by assuming a single constant prepayment rate for the underlying Trust Fund Assets.​

 

[Yan He]

great! thank you so much John. Actually, the three desctiption I posted come with TAC and Z. That's why I am thinking to put the security under CO type.

 

[John]

I see, that makes sense now. The companion bond is asscoiated with the TAC bonds, and the AD (accredited directed) tranches go with the Z (accrual bonds).

 

[Yan He]

So do you think what type I should put there? TAC and Z ? Does it make sense?

 

[John]

great! thank you so much John. Actually, the three desctiption I posted come with TAC and Z. That's why I am thinking to put the security under CO type.

do you have the deal name (e.g. Countrywide mortgage pass-through trust 2006-20)? I need to look at the prospectus supplement, as e.g. a TAC can also be a AD bond.

 

[Yan He]

I.C. the only thing I can get is CUSIPs...then go for Bloomberg for description, then try to categorize them into our database. Will post here when I get a detailed example.

Thanks a lot, John.