Maintenance of subordination Sample Clauses
The "Maintenance of subordination" clause ensures that a particular debt or obligation remains subordinate to other specified debts, typically senior loans or primary obligations. In practice, this means that if the borrower defaults or enters bankruptcy, the subordinated debt will only be repaid after the senior debts have been satisfied. This clause is commonly used in financing arrangements to protect the interests of senior lenders by preventing junior creditors from claiming repayment on equal terms. Its core function is to clearly establish the priority of payments among creditors, thereby reducing the risk for senior lenders and facilitating structured financing.
Maintenance of subordination. The subordination level for a class (other than a ratio-stripped IO class) is the sum of the class percentages of all classes that are subordinate to that class. If a class’s subordination level on the day before a distribution day is less than the class’s initial subordination level, then the class will have an impaired subordination level on that distribution day. If a subordinated class has an impaired subordination level on a distribution day, then all principal originally allocated to the subordinated classes will be allocated to the most senior of the subordinated classes with an impaired subordination level and to those subordinated classes that are senior to the impaired class, in proportion to their principal balances, up to those classes’ principal balances, and any remainder will be allocated to the remaining subordinated classes, in order of seniority, up to those classes’ principal balances. Example: Suppose that on a distribution day, (a) each of classes B-1 through B-6 had a principal balance on the preceding day of $1,000, (b) the aggregate principal allocation to the subordinated classes is $3,120, and (c) class B-2 has an impaired subordination level. Then on that distribution day
(1) the entire amount allocated to the subordinated classes will be allocated to classes B-1 and B-2, in proportion to their principal balances, up to their principal balances, and
(2) $1,000 of the remaining $1,120 will be allocated to class B-3, reducing its principal balance to zero, and
(3) the remaining $120 will be allocated to class B-4.
15.1 Order of allocation among senior target-rate classes
Maintenance of subordination. Impairment of subordination for subordinated classes of a multiple-pool series will be determined based on composite, not component, classes. In determining whether a composite class has an impaired subordination level, the principal balance of the composite class will equal the sum of the principal balances of its component classes. If a subordinated composite class has an impaired subordination level, then principal will be allocated among the subordinated composite classes pursuant to “Allocations - Maintenance of subordination” above, and, for purposes of adjusting principal balances, will be further allocated to the component classes in proportion to their principal balances.
Maintenance of subordination. The subordination level for a class (other than a ratio-stripped IO class) is the sum of the class percentages of all classes that are subordinate to that class. If a class’s subordination level on the day before a distribution day is less than the class’s initial subordination level, then the class will have an impaired subordination level on that distribution day. If a subordinated class has an impaired subordination level on a distribution day, then all principal originally allocated to the subordinated classes will be allocated to the most senior of the subordinated classes with an impaired subordination level and to those subordinated classes that are senior to the impaired class, in proportion to their principal balances, up to those classes’ principal balances, and any remainder will be allocated to the remaining subordinated classes, in order of seniority, up to those classes’ principal balances.