The priority of payments
The priority of payments decides who is paid, in what order, out of the money collected. It is the heart of a securitization. On CARA7 it is executed by the platform, identically on every payment date.
The available amount
Before the first rank is paid, the contract builds the pot:
available = collections + entire cash reserve + carry from the previous period
The whole reserve is released, not the part needed to cover a shortfall, and it is replenished at its own rank further down. Over a period this nets to zero, so it looks redundant until collections fall short: the reserve is already in the distributable amount, fees and senior interest are paid, and the reserve simply replenishes less. This is the release and replenishment cycle a benchmark transaction executes every month.
Seven ranks
| Rank | Payment | Note |
|---|---|---|
| 1 | Fees | Management company, custodian, paying agent. Fixed amounts, never a percentage of assets |
| 2 | Class A interest | EURIBOR 1M + 0.60%, floor 0%, actual/360 on outstanding nominal |
| 3 | Class B interest | 1.00% fixed |
| 4 | Class C interest | 1.50% fixed |
| 5 | Cash reserve refunded | Back to its required level, before any principal |
| 6 | Principal, sequentially | Class A in full, then B, then C |
| 7 | Residual | Whatever is left goes to the seller |
A benchmark European auto ABS runs sixteen ranks. This programme uses seven, omitting items it does not carry such as swap payments and several classes of subordinated fees. The order and the logic are unchanged.
Interest that cannot be paid
If the pot runs out before a class receives its full coupon, the unpaid part becomes a shortfall. It does not default the deal, and it does not stop the waterfall. It is recorded and paid at the next opportunity, ahead of the same rank in the following period.
Shortfalls do not themselves earn interest. This is deliberate and follows the prospectuses: a deferred coupon is a deferral, not a new loan.
Rounding
Interest and principal are computed per note, rounded down, then multiplied by the note count. Nothing is ever rounded up, because rounding up would pay out money the transaction does not hold.
The remainder is carried into the next payment date's distributable amount. The platform enforces, at settlement, that the issuer's cash equals the reserve plus the carry. A calculation that did not balance would not settle at all.
When things go wrong
If senior interest goes unpaid beyond the cure period, the transaction enters enforcement. The order changes: instead of paying every class its interest and then amortizing sequentially, Class A receives its interest and its entire principal before Class B receives anything.
Every subsequent payment date uses the accelerated order. The servicer cannot reverse it.
Verification
Every payment date publishes the amount applied at each rank, with the class breakdown and the settlement reference.
An independent agency layer recomputes the entire cascade from the portfolio data and reconciles it against what was paid. The most recent reconciliation matched every line to one ten-millionth of a euro. See the agency layer.