A deal is the on-chain representation of the off-chain securitized product (e.g. bond, debenture, …) and contains all the information of the underlying facility such as tenor, the public key of the borrower,…, as well as tranches, and a repayment schedule.
A deal is split up into tranches, creating investment opportunities for investors with different risk/return profiles. Most often a senior/mezzanine/junior tranche setup is used. In this setup, the senior tranche has the lowest risk, with the lowest return because it is protected by more junior tranches in case of defaults. If a default happens, the junior investors will lose (part of) their invested principal and gained interest as it flows to the senior tranche. Though this tranche setup is used in the majority of deals, the Credix platform allows for the creation of up to 10 tranches.
When a deal repayment hits our smart contract, it automatically calculates how much should go to every tranche’s principal and interest (based on the repayment schedule and tranche structure).
The repayment schedule defines how much interest/principal is expected per repayment period (e.g. 30 days). When a borrower does not repay on time, late fees are charged. Our technology allows arbitrary interest/principal schedules such as bullet, amortization, amortization with grace period, or any other exotic structure.
A tranche can be funded by a liquidity pool, meaning that investors who invest in this pool have exposure to all deals for which a tranche has been funded by this pool.