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Format of ABS

1

1495_sc

Ton up Member
Hello- can someone please help in understanding the purpose of format of asset-backed securities (ABS) ? Is there a practical example which I can read about? I presume that investment banks like Goldman Sachs must have this format.

I understand that the ABS is structured in a multi-tranche format instead of a single ABS in order to attract different types of investors but how does it work practically? Investor A would get in touch with Goldman Sachs ,for example, to invest in ABS 1. How is this multi tranche presented to the investor? If bonds worth 1 million are being backed by ABS 1, how is this split between senior debt, mezzanine and residual cashflow?
 
Thank you. I wish I could read the whole PDF and even understand it entirely. The ABS format seems to be applied in reality as well. Technical details of the format is explained to investor. I wonder if this conclusion is correct-

Goldman Sachs (GS) or any other IB will pay the investor X if the underlying bond defaults. Does different formats like mezzanine imply that different types of investors will have to pay different levels of premium to GS based on the formats+amount they invest in and if the underlying bond actually defaults in future, GS will prioritize different formats in a pre-defined order and accordingly pay the investors?
 
That rings true to me, with one caveat. Payments would be made to / from the SPV, not from GS.
 
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