A-note, Corporate Finance

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A-Note is the highest tranche of an asset backed security or another structured financial product. An A-note is superior to other notes, like B-notes in bankruptcy or other credit proceedings, and is paid back first with money from the underlying assets. They can be tagged AAA, AA, or A, on the basis of the credit quality of the underlying asset. They can also be known as a class a note.

Lower tranches of notes are known as subordinate notes. Whereas an A-note does provide more credit protection than any other notes, investors in this tranche be required to still pay attention to the credit worthiness of investments in subordinate classes. If the risk levels of those investments rise, the chances of failure of payment and repayment risk rise.

 

 

 


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