Repayments enter at the top
SeniorA bank or credit fund, or pPRIME investorsAbsorbs losses Fourth
pCORE · mezzanineProfessional investorsAbsorbs losses Third
pALPHA · juniorA professional credit investorAbsorbs losses Second
Originator first lossThe originator itself, at least 15%Absorbs losses First
Losses climb from the bottom
The originator’s own money is destroyed before any investor loses anything. That
is enforced by the contracts before the pool opens, not promised in a document.
Why the senior layer has two possible funders
The senior layer is the largest and the cheapest. Usually it is already filled by the originator’s existing bank or credit fund, and PRISM funds only the layers above it. Where no bank is present, PRISM can raise that layer too, as the pPRIME note. Either way the position in the waterfall is the same. What changes is who holds it and what it costs.What tranching does and does not do
That distinction matters more than anything else on this page. A tranche structure decides the order in which capital is destroyed. It cannot stop money leaving through the wrong door, which is a different problem addressed in Risk and protections.Next
A worked example
A $10M pool, and who absorbs the loss at each level.
Attachment points
The precise loss level at which each note starts to lose money.