In what a company source described as "similar to one big glorified NIM," Delta Funding packaged $148 million worth of home-equity residual interests into an amortizing trust, which will act as a receivable in place of high-yield debt that the company owes investors.

The unrated transaction is part of Delta's effort to restructure its debt, which the company announced it intended to do earlier this year.

The trust pays the residual cashflows from Delta's securitizations to the high-yield note holders. In exchange for the noteholders receiving a piece of this liquidating trust, they forfeit the right of repayment of the debt, due in 2003. This essentially extinguishes the obligation before maturity.

"This is a great way for the company to restructure itself and come out of some significant debt, which had really pushed the company back a few steps," the company source said. "Being able to swap residuals for debt was a win for us and a win for the noteholders."

Delta structured the amortizing trust without the help of an investment bank.

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