Waterfall: Difference between revisions

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imported>Doug Williamson
(Add priority ordering in liquidation.)
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#Connected unsecured creditors
#Connected unsecured creditors
#Shareholders
#Shareholders
Sometimes known as an ''insolvency waterfall''.




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Abbreviation for ''waterfall methodology''.
Abbreviation for ''waterfall methodology''.
:<span style="color:#4B0082">'''''Uniform determination methodology'''''</span>
:From mid-2018 a new, uniform determination methodology, the “waterfall methodology”, by which each contributing bank calculates the rates it submits, was progressively introduced. The underlying interest - the market or economic reality that the benchmark seeks to measure - remains the same.
:The “waterfall” methodology refers to the three bases for a bank’s rate submission... the first practical method being used in any case according to the information available... 
:The three bases in the LIBOR waterfall are:
:Level 1: Transaction-based
:Level 2: Transaction-derived
:Level 3: Expert judgement
:In summary, the new methodology is more rooted in actual transactions as far as possible. Using less “judgement” that can involve a (possibly unconscious) element of “smoothing”, contributed rates are expected to vary up and down more by small amounts each day. And, recognising the reality that banks short-term-fund in the wider money-markets now, rather just inter-bank, the range of transactions considered is being widened and this can mean small rate differences.
:Following the successful completion of the transition period, LIBOR is now, for each currency/maturity combination, the rate output as the arithmetic mean of the relevant panel banks’ waterfall-methodology based submissions, excluding the highest and lowest quartile of submissions.
:''The Treasurer's Wiki - LIBOR.''




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* [[Floating charge]]
* [[Floating charge]]
* [[Funding stack]]
* [[Funding stack]]
* [[Insolvency waterfall]]
* [[Junior debt]]
* [[Junior debt]]
* [[LIBOR]]
* [[LIBOR]]
* [[Liquidation]]
* [[Liquidation]]
* [[Preference]]
* [[Preference]]
* [[Preferential]]
* [[Preferential creditor]]
* [[Preferential creditor]]
* [[Risk-free rates]]
* [[Risk-free rates]]

Latest revision as of 14:10, 23 April 2023

1. Liquidation - claims.

The priority order of claims in a liquidation.

Broadly speaking, this priority order is:

  1. Secured creditors
  2. Preferential creditors
  3. Fixed charge creditors
  4. Floating charge creditors
  5. Unsecured creditors
  6. Connected unsecured creditors
  7. Shareholders


Sometimes known as an insolvency waterfall.


Breaching this ordering is a preference, that can be effectively reversed by an order of the court.


2. Liquidation.

The allocation of - usually limited - available funds in this priority order in a liquidation.


3. Allocating limited funds.

Any other ranked allocation of funds.


4. Risk-free rates - valuation.

Abbreviation for waterfall methodology.


See also

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