Not so much that somebody “pays too much” for capital, but rather, in tradfi securitizations, it is not uncommon to see a money market tranche that amortizes very quickly relative to the rest of the deal, paying money market rates. Rating agencies will rate these against their money market ratings scales rather than their traditional structured finance rating scales.
Some examples (note that these are super-senior to even the AAA rated tranches):
- COPAR 2022-1 class A-1 (credit card deal, rated A-1+/F1+)
- EART 2022-2 class A1 (subprime auto deal, rated A-1+)
Not so much of a concern, but rather an inefficiency. There is clearly capital willing to be locked in a senior credit for 12 months, and lots of capital not willing to be locked in a senior credit for 12 months. Why not have two separate senior tranches to address both sets of investors?
… Is what my non-developer, structured credit mind is thinking. However, I do understand that there are benefits in just keeping things as simple as possible for the crypto-native, non-structured credit savvy investors by keeping the structure to be unitranche (as-is) and just adjusting the vesting to 0 days, and adjusting the different levers as you go.
Perhaps it may be too soon (at least for the Goldfinch platform) to impose a traditional yield curve/term structure, and this sort of “reset” is needed to come up with a better way to marry the term structure of the underlying RWA with DeFi investing sometime in the (hopefully near) future.