Overcollateralization

How it is used

State the valuation method and ratio; excess collateral differs from the deduction called a haircut.

Example sentences

1. The bond structure maintained overcollateralization by holding more assets than outstanding notes.

   The excess asset value creates a buffer for protected creditors.

2. Falling asset values reduced the transaction's overcollateralization.

   The buffer can shrink without any new borrowing.

Common collocations

• overcollateralization ratio
• maintain overcollateralization

Related terms

• collateralAn asset, such as property, cash or securities, that a borrower pledges to a lender and that the lender can sell if the loan is not repaid.
• bondA debt security that a government or company sells to investors to borrow money. It pays regular interest, called a coupon, and returns the full amount at maturity.

More terms: Corporate Finance

• cash flow
• capital
• working capital
• leverage
• dividend
• valuation
• M&A
• IPO
• due diligence
• shareholder
• raise capital
• issue