Lesson 14 of 25 · 7 min
Why selling Calder to cure is different from selling the government fund
The same $806,575.57 leaves a 63 percent blend or a 52 percent blend, depending only on which row is sold first.
The sale to cure is $806,575.57 on the 60 percent book. That is a dollar amount, not a row. Which row it comes out of changes the leftover blend and the leftover concentration, because the five rows do not carry the same advance rate and do not have the same size.
After the 60 percent decline Calder is worth $736,002 and the government fund is worth $380,556. Neither row can fund $806,575.57 alone. Selling Calder first exhausts the name and still needs $70,573.57 from the next row — take that remainder from Meridian, the other large single name. Leftover market value is $1,606,542.43 in either path, because the same dollars were sold. Leftover lending value is not the same.
Calder-first leftover lending value is $1,018,013.02, a blend of 63.37 percent. Calder is gone. Meridian is 41.38 percent of what remains. Government-fund-first leftover lending value is $838,321.05, a blend of 52.18 percent. The government fund is gone. Calder is still 19.30 percent of the leftover book, and Meridian is 45.77 percent. Eleven points of blend, and a concentrated name that is either absent or still there, from the same dollar sale.
The difference is the advance rate being removed. Calder advances at 35 percent, so taking it out raises the blend of what remains. The government fund advances at 85 percent, so taking it out lowers the blend and leaves the two single-name rows as a larger share of a thinner collateral base. The sale figure does not name a row. The leftover book does.
Key terms
- Source row
- The holding the sale is taken from first. The dollar amount of the sale does not name it; the leftover book does.
- Leftover blend
- Lending value divided by market value after the sale. 63.37 percent if Calder goes first; 52.18 percent if the government fund does.
- Leftover concentration
- Each remaining row as a share of the leftover book. Exhausting Calder deletes a 35 percent name; exhausting the government fund leaves both single names.
Worked example
One sale, two leftover books
60 percent book. Sale $806,575.57. Leftover market value $1,606,542.43 either way. Remainder after exhausting the first row comes from the other large name.
- Calder after 60 percent, then sold first
- $736,002
- Calder-first leftover lending value
- $1,018,013.02
- Calder share of the leftover book
- 0%
- Government fund after 60 percent, then sold first
- $380,556
- Fund-first leftover lending value
- $838,321.05
- Calder share after the fund is sold
- 19.30%
Remainder $70,573.57 from Meridian.
Blend 63.37 percent.
The name is gone.
Remainder $426,019.57 from Calder.
Blend 52.18 percent.
Meridian 45.77 percent.
Same sale, same leftover market value, eleven points of blend and a different leftover name. The row is part of the arithmetic.
Check yourself
On the 60 percent book, a sale of $806,575.57 taken first from Calder leaves a 63.37 percent blend. The same sale taken first from the government fund leaves 52.18 percent. What produces the eleven-point gap?
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Educational only. Nothing in this lesson is investment, legal or tax advice, or a recommendation to enter into any transaction. Figures are illustrative and computed from the inputs stated in the lesson.