Controlled Amortization Bond
Controlled Amortization Bond. Bond that is securitized using a Controlled Amortization Structure. Revolving debt (primarily credit card receivables, but also HELOCs, trade receivables, dealer floor-plan loans and some leases) may be securitized using a controlled amortization structure.
This is a method of providing investors with a relatively predictable repayment schedule, even though the underlying assets are nonamortizing. Controlled-amortization ABS resemble corporate bonds with a sinking fund. After a predetermined 'revolving' period during which only interest payments are made, these securities attempt to return principal to investors in a series of defined periodic payments that usually occur over less than a year. A risk inherent in this kind of ABS is an early amortization event
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