# Sequential Waterfall

### **1. Sequential Structure**

In a **Sequential** (or “waterfall”) structure, Senior investors are paid first. Junior investors receive repayments only after all Senior obligations are fully cleared.

#### **How It Works**

When the pool receives a repayment:

**Interest Distribution**

1. Outstanding **Senior overdue interest** is paid first.
2. Then **current Senior interest** is paid.
3. Any remaining interest goes to the **Excess Interest Spread (EIS)**.
4. Only after the Senior tranche is fully repaid (no outstanding principal) does interest start flowing to Junior:
   * Junior overdue interest
   * Junior current interest

**Principal Distribution**

1. All principal first repays:
   * Senior overdue principal
   * Senior current principal
2. After the Senior tranche is fully repaid, principal flows to:
   * Junior overdue principal
   * Junior current principal

#### **In Simple Terms**

* Senior investors get repaid first—both interest and principal.
* Junior begins receiving principal only after Senior is completely paid down.
* This structure provides **maximum protection** to Senior investors.