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?
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?