In MOONSTAR CO (SEP/DEC 15)

1. The cash flows receivable is 22M, and this has to then be paid out to the lenders. For the A, B and C loan notes, the amount to pay is a fixed interest. However subordinated certificates get whatever is left over (rather than getting fixed interest). 2. The total being raised using the securitisation process is 90% x 200M = 180M. The subordinated certificates are providing 10% of the amount, which is 18M. (You won't find this in the textbook, because it is not a 'standard learning' question - it is following the instructions in the question itself)

Hi again John, When talking on securitisation and tranching. In the question Moonstar, we want to finance acquisition of commercial property $200m. This property generates income of 11% annually. Am I correct when understand this as we cannot receive any income from this activity (commercial property) at all ? What i mean in details -> 11% of $200m is $22m (do not take into account admin. costs) . And all of this income goes to finance providers. If this % of income is lower or higher -> then finance providers, not the Company itself, burden the risks (if lower) or benefits from it (if higher). For example when we raise funding of $200 with fixed 11% as a usual loan to purchase commercial property - If the income from commercial property is 12%, then 1% is the Company's net income (not accounting tax). But with securitisation, all 12% will now be distributed benefiting subordinate certificate holders? Am i correct in this? Thanks Nick

Yes - that is correct.

Thank you, John!

You are welcome :-)