Template:M intro repack application of proceeds

There comes a time in a asset-backed espievie’s life when things go Germknödel in der Luft‎. This can happen two ways:

The expected way: because some part of the security package — an underlying asset, a swap counterparty or, heaven forbid, the paying agent has failed. These are regrettable externalities of la vie financière which no-one wants, exactly, but exposure to these risks, and the compensation one earns for running them, is what motivates repackaging investors to come to the table in the first place: if none of these risks ever came about there would no risk premium either.

The unexpected way: because the espievie itself has failed. This is unexpected because from its socks and bloomers a repackaging vehicle is architected so that it cannot, even in theory, go bankrupt. but espievies can go bankrupt, in practice — at least in theory. If you see what I mean. But it involves — whisper it — someone screwing up. For an SPV to go insolvent there much be a flaw of some kind in the ring-fencing.